GST — Model Answers

Explain the net GST formula under the course framework and why GST is commonly described as a value-added tax.

The net amount is broadly GST on taxable supplies/importations less input tax credits on creditable acquisitions/importations, adjusted for statutory increasing/decreasing adjustments. It is value-added in economic effect because registered businesses generally receive credits for qualifying GST borne on business inputs while GST ultimately remains on final consumption.

State the GST character, credit position and any special rule or further fact required.

A business is carrying on an enterprise and its turnover is approaching the threshold. Explain the role of s 23-5 and Division 188.

Section 23-5 is the registration gateway. The entity must consider whether it carries on an enterprise and whether GST turnover meets the statutory registration threshold. Division 188 determines turnover using current/projected measures and statutory exclusions; accounting sales alone are not the legal test.

State the GST character, credit position and any special rule or further fact required.

State and explain every element of s 9-5, including the final GST-free/input-taxed qualification.

Section 9-5 requires: (a) supply for consideration; (b) in the course or furtherance of an enterprise the supplier carries on; (c) connected with the indirect tax zone; and (d) supplier registered or required to be registered. Even where all four positive limbs are met, the supply is not taxable to the extent it is GST-free or input taxed.

State the GST character, credit position and any special rule or further fact required.

Why is the statutory definition of 'supply' broader than a sale of goods? Use Qantas as an illustration of legal characterisation.

Section 9-10 extends beyond goods to services, rights, real property, obligations, advice and other forms of supply. Qantas shows why the legal rights and obligations created by a transaction matter. The customer's everyday description of the transaction does not replace the statutory characterisation.

State the GST character, credit position and any special rule or further fact required.

A supplier receives property rather than cash in return for services. Can there still be consideration for GST purposes?

Yes. Section 9-15 can treat non-monetary consideration as consideration where the required connection with the supply exists. The GST value then requires valuation of the non-cash consideration under the statutory rules.

State the GST character, credit position and any special rule or further fact required.

Explain why a lease or one-off commercial property venture may require an enterprise analysis even if the taxpayer says 'I am not running a shop'.

Enterprise under s 9-20 is broader than ordinary 'business'. Regular leasing and an adventure or concern in the nature of trade can be included. Therefore the legal question is the statutory character of the activity, not whether the taxpayer uses the word 'business'.

State the GST character, credit position and any special rule or further fact required.

Explain the practical difference between a GST-free supply and an input-taxed supply.

GST-free: no GST charged, but related acquisitions can generally still produce input tax credits. Input taxed: no GST charged, but related input tax credits are generally denied. The difference therefore affects both pricing and embedded tax cost.

State the GST character, credit position and any special rule or further fact required.

List the central statutory conditions that must be tested before a business sale can be treated as GST-free as a going concern.

Test the written agreement, consideration, recipient registration requirement, supply of all things necessary for the continued operation of the identified enterprise, and the requirement that the supplier carry on the enterprise until the day of supply. GSTR 2002/5 should then be used to apply those concepts.

State the GST character, credit position and any special rule or further fact required.

What must a registered purchaser prove under s 11-5 and s 11-15 before claiming an input tax credit?

Under s 11-5 the acquisition must be for a creditable purpose, the supply to the purchaser must be taxable, the purchaser must provide consideration and be registered/required to be registered. Section 11-15 then limits creditable purpose for private/domestic use and acquisitions relating to input-taxed supplies.

State the GST character, credit position and any special rule or further fact required.

Distinguish taxable importation from creditable importation.

A taxable importation is the liability-side rule for importing goods into Australia under Division 13. A creditable importation under Division 15 is the recipient's credit-side rule and requires, among other things, creditable purpose and registration. Liability and credit therefore must be analysed separately.

State the GST character, credit position and any special rule or further fact required.

Explain the GST treatment of a genuine security deposit and the significance of Reliance Carpet when the deposit is forfeited.

A genuine security deposit is generally not treated as consideration until forfeited or applied as consideration under Division 99. In Reliance Carpet, forfeiture of a land-sale deposit had GST consequences because the deposit became consideration for a taxable supply. First determine whether the amount is truly security or instead a cancellation fee/part-payment.

State the GST character, credit position and any special rule or further fact required.

A GST-registered developer sells real property. Explain the classification questions that must be answered before deciding whether ordinary GST or the margin scheme applies.

First classify the property: new residential, existing residential, commercial residential, ordinary commercial, farmland, going concern or another category. Then apply s 9-5 and the specific Division 38/40 rules. If the supply is taxable real property, test Division 75 eligibility, acquisition history and the written margin-scheme agreement. GSTR 2006/8 provides the course guidance on post-1 July 2000 real-property acquisitions.

State the GST character, credit position and any special rule or further fact required.