9. Australian Taxation Arrangements

9.1 Introduction

This Chapter covers the recording and reporting of the Commonwealth Fringe Benefits Tax (FBT) and Goods and Services Tax (GST).

Fringe Benefits Tax (FBT)

Fringe Benefits Tax (FBT) is paid by the department on the grossed up value of benefits provided to Australian staff arising from their employment. The grossed-up value is the cost to the department of providing the benefit plus an amount deemed to be the tax that would have been paid on the benefit by employees had the benefits been included in their taxable income. In general, all benefits received by employees that are not subject to income tax are subject to fringe benefits tax.

The department must lodge an annual FBT return with the Australian Taxation Office. In addition, the grossed up value of some fringe benefits (reportable fringe benefits) received by employees are required to be included on employee payment summaries.

To enable the department to accurately compile its annual FBT return, and pay the correct amount of tax, the accurate recording of fringe benefits is required. Specific general ledger codes have been created for this purpose. Approvers must ensure that payments related to FBT are coded correctly.

Goods and Services Tax (GST)

Goods and Services Tax (GST) is payable on the purchase of most goods and services consumed in Australia. GST may be applicable to goods or services purchased for use at overseas posts depending on the manner in which the supplier delivers the goods to the post. Also, the department is required to collect GST on most goods and services provided to external parties, if those goods or services are used in Australia (eg GST is charged on the sale of publications in Australia).

Australian businesses should have an Australian Business Number (ABN). The ABN must be quoted on tax invoices. Tax invoices must be issued when a good or service with GST is sold and the GST-inclusive value of the transaction is greater than the threshold (currently $82.50) advised by the ATO. If a supplier does not quote an ABN, and does not provide a valid reason for not quoting an ABN, the department must withhold an amount equivalent to the top marginal tax rate of the payment to the supplier and remit it to the ATO as a 'no ABN withholding tax'.

The department lodges a monthly Business Activity Statement (BAS) with the ATO. The BAS details the GST paid on purchases and GST collected on sales. The department pays net GST collected to the ATO is entitled to a refund of the net GST paid.

To enable the accurate reporting of GST in the monthly BAS it is essential that transactions use the correct tax code in SAP or PTWS.

9.2 Fringe Benefits Tax (FBT)

Instructions

1. Approvers and Approvers' agents must ensure that fringe benefits expenditure is charged to the correct SAP GL code and, where required, against the recipient’s personnel number.
2. To allow for the preparation of the department's annual FBT return, and the reporting of the grossed-up value of fringe benefits on employee payment summaries, Finance Managers must report on fringe benefits as requested by the CFO.
3. The CFO must ensure the FBT return is completed and lodged with the ATO in accordance with the ATO’s guidelines.
4. The CFO must ensure that FBT payments, including instalments, are made by the due date.

Procedure

Responsibility

• Approvers and Approvers' agents
• Finance Managers
• Chief Finance Officer

Frequency/Conditions

• Recording of fringe benefits - as benefits are provided
• Reporting of fringe benefits - as requested
• Preparation and lodgement of the department's FBT return - annually

Action

Finance Managers

• Ensure that:
• Fringe benefits provided to employees are accurately and promptly recorded in SAP against the correct GL codes and employees
• Fringe benefits reporting is provided to the CFO as requested

Chief Finance Officer

• Compile and lodge the department's FBT return in accordance with the ATO’s guidelines
• Ensure that FBT payments, including instalments, are paid to the ATO by the due dates.

9.3 Goods and Services Tax (GST)

Instructions

Purchase of goods and services

1. Invoices must be entered to SAP or PTWS with the correct tax code. Refer to the attached Guide to GST for more information.
2. Where a supplier does not provide an ABN the vendor master record must be updated so that 'no ABN withholding tax' is withheld from payments to the supplier and remitted to the ATO.
3. A payment must not be authorised unless a valid tax invoice has been received for purchases of goods and services that are subject to GST.

Sale of goods and services

4. Branch Heads (Australia) and Finance Managers are responsible for ensuring that GST is correctly applied to all taxable supplies.
5. Finance Managers should provide a tax invoice to purchasers of goods and services that are subject to GST. Tax invoices should be produced at the point of sale or within 28 days of a request by the purchaser.

GST reporting and payment

6. The CFO must prepare and lodge the department’s Business Activity Statement with the ATO in accordance with the ATO’s guidelines.

Procedure

Responsibility

• Payment authorisers
• Finance Managers
• Chief Finance Officer

Guide to GST tax codes

Using the correct tax code ensures:

• The department meets, but does not exceed, its tax obligation.
• The work area’s budget does not pay any GST. If a work area uses tax code AZ (no GST) instead of A1 (GST included) to pay a GST inclusive invoice, SAP will debit the GST amount against the work area’s budget instead of the centrally managed GST fund.

Purchases of goods and services

The diagram below is a decision tree to determine the GST status of goods and services purchased by posts and Australian work areas. It should be noted:

• Out of Scope: the good or service falls outside the GST arrangements and tax code AZ should be used.
• In Scope: the good or service falls within the GST arrangements and the appropriate tax code (ie A0, A1, A2, or A3) should be used. Refer to the tax code table below for information.
• Direct supply: the good or service was provided direct to the post. Direct supplies are out of scope for GST purposes.
  • Example 1: The supplier shipped the goods direct to the post. If the goods were delivered to the post via an address in Australia (eg DFAT, Canberra) it would be an indirect supply and in scope for GST purposes.
  • Example 2: An Australian law firm provided legal advice direct to the post. If the legal advice was provided to a Canberra work area who forwarded it to the post it would be an indirect supply and in scope for GST purposes.

The table below explains the tax codes relating to the purchase of goods and services.

Tax code	GST rate	Description	Examples
A0	Nil	GST free purchase.	Basic food and water (eg fruit & vegetables, meat, fish, unflavoured milk). International travel (including the domestic component) and international freight. Health insurance. School fees and childcare through approved providers. Exports if exported within 60 days. Note: Prepared food (eg restaurants, biscuits, etc) is subject to GST.
A1	10%	Purchase subject to GST.	This code covers most goods and services purchased in Australia, including goods and services imported into Australia, including: Office supplies. Domestic travel and accommodation. Consultants/contractor services. Conference room- hire. Seminar registration. Catering services. Note: This code does not apply to Australian capital asset purchases > $2,000 Use code A2.
A2	10%	Capital purchase that is subject to GST.	This code covers capital goods and services purchased in Australia, including goods and services imported into Australia, including: Computers. Printers/Scanners. Furniture and fittings (Subject to normal departmental threshold >$2,000). Importations of capital-related goods from overseas Note: Some purchases of goods that are part of a capital acquisition (eg additional equipment parts) are included in tax code A2.
A3	Nil	Input taxed purchase that is GST exempt.	Residential rent. Interest on overdrafts. Bank charges.
AZ	Nil	Purchase that is out of scope for GST purposes.	Purchases made by posts from overseas suppliers. Salaries and salary related expenditure (superannuation, leave, travel allowance). TELs and CSSA payments. Contributions to overseas international organisations and peace keeping operations. Intra-DFAT expense transactions. Acquisitions from suppliers without ABNs. Acquisitions from suppliers with ABN’s but are not registered for GST (GST credits cannot be claimed). Credit card purchases made overseas or from overseas suppliers (eg minor purchases less than $1,000 (GST exempt)).

Sales of goods and services

The diagram below is a decision tree used to determine the GST status of goods and services sold by posts and Australian work areas. It should be noted:

• Out of Scope: the good or service falls outside the GST arrangements and tax code AZ should be used.
• In Scope: the good or service falls within the GST arrangements and the appropriate tax code (ie G0, G1, G2, or G3) should be used. Refer to the tax code table below for information.

The table below explains the tax codes relating to the sale of goods and services.

Tax code	GST rate	Description	Examples
G0	Nil	GST free supply.	Generally not applicable to DFAT sales or DFAT provided services. First Aid course conducted by an accredited first aid trainer.
G1	10%	Supply subject to GST.	Publication sales. Fees charged in relation to seminars. ISB/IPB sales including cost recovery. Employee contributions towards exempt fringe benefits. Statistical services.
G2	Nil	Input taxed supply that is GST exempt.	Financial dealings. Bank interest.
G3	Nil	Export sale that is GST free.	Publication sales to non-residents which are exported within 60 days.
GZ	Nil	Supply that is out of scope for GST purposes.	Passport and consular fees (including refunds). Provision of notarial services. Sales made by posts. Repayments of TELs and CSSA deposits. Intra-DFAT sales.

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