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  • #979220
    SuzzyGal
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    Hi everyone… just hoping you can give me some information on this.

    Say for example for the financial year my taxable income is $60,000
    But through the year I have paid an additional $10,000 GST which I could not claim back (mainly because all stock is imported from overseas).

    I’m just trying to get my head around this. So even though my taxable income is $60k, I’ve paid an additional $10k in expenses which can’t deduct from this. So I’ve actually only made $50k profit over the course of the year?

    #1112886
    MyGreatIdea
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    Sorry SuzzyGal, but your question doesn’t make total sense. I’m reading that you’re not registered for GST? What do you mean then by “which I could not claim back”? Do you mean couldn’t claim back on a BAS or couldn’t claim as a cost against your taxable income?

    If you’re not registered for GST, then the $10,000 GST you have paid (I’m assuming on import) should be included as a direct cost – it’s something you’ve had to pay to get your product to your door ready for sale. This will also apply to GST paid on any expenses (phone, stationery etc).

    If you are registered for GST then there’s no reason why you shouldn’t have claimed the GST on your BAS.

    Hope this helps

    Wendy :)

    #1112887
    Corey
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    Have you researched the Australian Taxation Office website?

    GST essentials – Explains how GST works and what you need to do to meet your GST obligations.

    Cheers
    Corey

    #1112888
    SuzzyGal
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    Hi, yeah I’m registered for GST and know how to works. I buy my stock from overseas so can not claim those purchases on GST. I mean that I’ve paid an additional $10k GST from my customers orders.

    #1112889
    JacquiPryor
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    Hi SuzzyGal,

    Your overseas purchases shouldn’t have a GST component to have to worry about. If your supplier is in USA for example, they won’t be charging GST to you.

    As to your customer orders – i.e. customer pays you a total amount that includes GST, this has added up to 10K for the financial year – (this is my understanding of your post) – this should be claimed via your BAS each month/quarter (however frequently you file).

    If you have filed BAS throughout the financial year, this will have included that 10K worth of GST over the year, so, it’s not an “additional” expense like you say in your post – it is one that has already been claimed. So, it should already have been ‘allowed’ for in coming to your total taxable income and/or profit for the year.

    Sorry if we are still not following your question?

    #1112890
    James Millar
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    If you are registered for GST then you can claim the input tax credits back on creditable acquisitions – including stock.

    Stock imported on a commercial basis will generally contain GST. Sorry Jacqui but there is actually GST levied via customs and the clearance process and its payable by the owner. This can be the foreign entity or the local entity depending on the importation agreement – someone generally pays GST on imports however. There is a customs ATO GST deferral scheme available for imports but it requires separate registration and approval.

    Your expense deduction for income tax is equal to amount you pay after any GST credits have been claimed back. If you can’t claim the GST back then you can claim the full gross amount (Inc GST) as a deduction.

    Helping build better businesses and better lives with expert financial and taxation advice. [email protected] www.360partners.com.au 03 9005 4900
    #1112891
    chixfashionz
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    SuzzyGal, post: 125943 wrote:
    Hi everyone… just hoping you can give me some information on this.

    Say for example for the financial year my taxable income is $60,000
    But through the year I have paid an additional $10,000 GST which I could not claim back (mainly because all stock is imported from overseas).

    I’m just trying to get my head around this. So even though my taxable income is $60k, I’ve paid an additional $10k in expenses which can’t deduct from this. So I’ve actually only made $50k profit over the course of the year?

    Hi Suzy

    Gathering by the figures you are talking about, your imports are in small quantities, i.e. under $1,000 and therefore not subject to pay the GST upon import. So you are saying that there is no GST input tax credits you can claim for the imports, BUT YOU HAVE TO PAY 10% GST when the items are sold.

    Assuming your income exceeds $75,000 per annum, then yes you have to collect 10% GST on ALL sales, regardless of where you stock comes from. When you are doing your costings, you need to take into consideration the effect of having to pay both GST and income tax, regardless of the ability to claim for input tax credits or not.

    Your margins might appear to be affected by this, but this is another factor you needed to consider in pricing your goods to start with. With prices in the marketplace being so fluid, a price fluctuation in either your imports (cost of goods sold), or your selling price will affect the tax payable and possibly GST payable as well.

    Many people know they have to charge the extra 10%, but have difficulty separating it when the time comes to actually pay the GST!!! I.e. one-eleventh of your sales revenue is being taken from you BEFORE you even consider profitability and taxation levied upon it!!!

    If your orders were over $1,000 there would be GST levied on them. As mentioned by another contributor, it would then come down to who agreed to pay it – you or your supplier!

    #1112892
    DWelshe_GST
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    I’m a little confused by the facts here, but understand your scenario is that you are acquiring imported goods (and not incurring GST on them) and then on-selling them to Australian customers. You are GST-registered and your GST liability on your sales is $10,000. I am assuming the goods are not GST-free.

    Whether GST was incurred on the importation of the goods depends on the value of the goods. If the $1,000 threshold was exceeded then either you would have accounted for GST on the importation (as the person named as the importer on the Customs entry), or the overseas supplier was the importer and paid the GST. If the overseas supplier paid the GST then likely case is that either they claimed an input tax credit for this GST and then charged you GST (which you can claim as a input tax credit if you hold a tax invoice), or they just copped the GST and charged you a price which included embedded GST (and you can’t claim a credit). If you instead were the importer and paid the GST on the importation you could claim a credit for it.

    Regardless of whether there was GST incurred on your acquisition of the goods you are liable for GST on the sales. If your GST liability was $10,000 I presume your total sales were $110,000 inclusive of GST. Your income for income tax and accounting purposes is then $100,000 (ie the sales amount excluding the GST). Deduct from that your expenses net of input tax credits to arrive at your taxable income. If I understand your question correctly, your expenses net of input tax credits are $50,000, so your taxable income will indeed be $50,000 rather than $60,000 as the $10,000 GST is excluded from your income (100 – 50 = 50 taxable income).

    As mentioned by a previous poster, you need to ensure your pricing of sales takes into account having to pay away 1/11th as GST to the ATO.

    Cheers
    Damian Welshe
    Damian Welshe & Associates
    http://www.gstconsulting.com.au

    Please ensure you seek out professional advice for your specific circumstances. Liability limited by a scheme approved under Professional Standards Legislation.

    #1112893
    SuzzyGal
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    I will see if I can simply this. (I know how GST work).

    I sell $200k worth of stock (which includes $22k GST which I have paid). My expenses cost $100k which includes $50k of stock (which I bought from overseas).

    So I have made $100k. But because I have already paid an extra $22k to the tax department for the GST. Even though I have made $100k, have I only really made $78k for the year? Or does my income take into considering the GST i have paid.

    #1112894
    MyGreatIdea
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    SuzzyGal, post: 126691 wrote:
    I will see if I can simply this. (I know how GST work).

    I sell $200k worth of stock (which includes $22k GST which I have paid). My expenses cost $100k which includes $50k of stock (which I bought from overseas).

    So I have made $100k. But because I have already paid an extra $22k to the tax department for the GST. Even though I have made $100k, have I only really made $78k for the year? Or does my income take into considering the GST i have paid.

    You need to completely ignore GST in any profit and loss scenarios. It is a balance sheet item and is never your money anyway. It has no impact on income or profit.

    Your post should read: you have an income of $178k. After purchasing stock worth $50k and having expenses of $50k, your taxable income is $78k.

    However, this being a hypothetical amount, I would have thought that your $50k worth of expenses (not the stock) must have included GST? Phone, stationery etc all basic expenses which incur GST. If that is the case then the post would have read:

    Income of $178k, less stock purchases of $50k, less expenses of $45,500 giving a taxable income of $82,500.

    Your BAS would have shown GST received as $22k and GST paid as $4,500, with a payment to the ATO of $17,500.

    Does that help?

    Wendy :)

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