Goods and services tax instruction

Intent

Goods and services tax (GST) is a broad-based tax of 10% on most goods, services and other items sold or consumed in Australia. These guidelines provide information about the various areas of GST that impact RMIT and the GST implications.

Scope

University-wide

Exclusions

None.

Instruction steps and actions

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Acquisitions and input tax credits

1. Introduction

RMIT, being registered for GST will be entitled to an input tax credit in respect of an acquisition where:

  • it has a creditable purpose;
  • it was a taxable supply;
  • there is a tax invoice supporting the acquisition;
  • RMIT has provided or is required to provide consideration for the acquisition.

2. What is a creditable purpose?

A creditable purpose is similar to a business purpose. An acquisition has a creditable purpose where it is used in the carrying on of an enterprise. An acquisition does not have a creditable purpose to the extent that it is used in making input taxed supplies or is used for private or domestic purposes. Where an acquisition has only a partly creditable purpose, an input tax credit will only be allowable for the creditable portion.

The diagram below summarises the general concepts of acquisitions and input tax credits.

DIAGRAM – acquisitions and input tax credits

Imports

1. Introduction

GST is payable on most goods imported into Australia. This is because the benefits arising from the imports would be enjoyed or consumed in Australia. GST is not payable on the imports of supplies that are not goods.

2. How will GST be paid on imports

The Australian Customs and Border Protection Service (ACBPS) collect GST on any taxable importations at a rate of 10 % of the value of the taxable importation.

A taxable importation is the sum of:

  • The customs value of the goods;
  • Any customs duty payable;
  • The amount payable to transport the goods to the port or airport of final destination in Australia; and
  • The insurance cost for that transport.

3. Claiming Input tax credits on imports

RMIT University has been issued an “owner code” by Customs upon the first taxable importation post the commencement of GST, 1 July 2000. The code is quoted each time an import enters Australia. Customs require a Customs Entry Form completed with owner code, and the ABN to be specified. The information is entered to Customs systems, which has been linked to the Australian Tax Office (ATO).

The entry of RMIT University’s ABN triggers a response and transfer of GST information from Customs to the ATO of the total value of GST on the current month’s imports. This value of GST paid on the current month’s imports is advised on the current electronic BAS provided to RMIT University for completion and lodgement to the ATO by the 21st day of the next month.

The advised amount on the electronic BAS serves the purpose of a tax invoice and confirms the “input tax credit” available for claiming by RMIT in the current BAS lodgement.

4. When are imports non-taxable

Some importations made by RMIT University are not taxable for GST. An importation which will not be taxable if:

  • the item would have been GST free if supplied within Australia; or
  • it qualifies for Customs duty concessions.

Customs duty concessions will include certain warranty-related importations such as:

  • goods previously imported into Australia and returned for repair overseas (under warranty); or
  • goods imported (under warranty) to replace goods previously imported into Australia.

Customs duty concessions will also apply where goods are of insubstantial value. In this instance, insubstantial value takes the meaning of, the value on which customs duty and taxes of the goods total less than $50, and which have customs value of less than $ 1,000 (for goods imported by post), or less than $ 250 for other goods.

When taxable and non-taxable importations are made as part of the same shipment, Customs will calculate the GST according to the proportion of the shipment that is taxable.

5. Deferring GST payments on imports

Some approved entities will be allowed to defer payment of GST on imported goods under the Deferred GST Scheme. This scheme allows GST to be deferred until the first Business Activity Statement (BAS) is submitted after the goods sold to the final consumer. The GST regulations also allow importers to defer payment of GST on some other taxable importations.

RMIT University has obtained approval in writing from the ATO to defer payment of GST and operates under this scheme.

6. How this scheme works

RMIT University quotes its ABN to Customs when goods are imported into Australia, and after payment of any Customs Duty and other charges, releases the goods to RMIT.

Customs records the deferred GST liability of each shipment as it is cleared and at the end of each month, advises the ATO of the total deferred GST liability of each importer who has deferred GST.

The electronic BAS RMIT university collects online for completion each month contains the value of the current month’s deferred GST liability.

The advised amount on the electronic BAS serves the purpose of a tax invoice and confirms the “input tax credit” available for claiming by RMIT in the current BAS lodgement.

Exports

1. Introduction

GST will be payable of most goods and services provided in Australia. However, most exports of goods and services from Australia will be GST-free.

2. Which exports will be GST-free

Generally, GST-free exports comprise:

  • Goods physically exported from Australia
  • Services performed outside Australia for a non-resident.

2.1. Export of goods

Exports will be GST-free when the supplier exports them before or within 60 days of:

  • The date any payment is made for the goods, or
  • If earlier, the date on which the supplier provides an invoice, or
  • If the goods are paid for in instalments the date on which any of the final installment is paid, or if earlier, the date on which the supplier provides an invoice for final installment.

If the export is not made before the end of the 60 day period, the supplier loses the GST-free status on those goods unless the Commissioner of Taxation allows further time.

Exported goods are not GST-free if the supplier re-imports the goods into Australia. Exports of goods may not be relevant for RMIT’s purposes. Subsection 3 8-190(1) of the GST Act lists supplies of things that are GST-free as exports. This list of GST-free exports include:

(a) A supply that is made to a recipient who is not an Australian resident and is not in Australia when the thing supplied is done (other than a supply directly connected with goods situated in Australia when the thing supplied is done, or with real property situated in Australia); and

(b) A supply that is made to a recipient who is not in Australia when the thing supplied is done and the effective use or enjoyment of which takes place outside Australia (other than a supply directly connected with goods situated in Australia when the thing supplied is done, or with real property situated in Australia).

(c) A supply made in relation to rights if the rights are for use outside Australia or the supply is to an entity that is not an Australian resident and is outside Australia when the thing supplied is done.

Under subsection 38-190(3), a supply covered by paragraph (a) above is not GST free if:

  • It is a supply under an agreement entered into, whether directly or indirectly, with a non-resident; and
  • The supply is provided, or the agreement requires it to be provided, to another entity in Australia

2.2. Export of services

Services exported by RMIT for consumption outside Australia will be GST-free in the following cases:

  • The services relate to goods or real estate outside Australia, e.g. If as part of an architecture course at RMIT, a student must design a building for a company or individual, and the student designs one for a non-resident, and the building is to be constructed in another country, his fee will be GST-free.
  • Services are provided to a non-resident who is not in Australia at that time.
  • Services provided to someone who is not in Australia, and the services are used outside Australia (cannot be directly related to goods or real property in Australia).

Education

1. Summary

Accredited Higher Education or VET Courses are all GST free and all of these courses require assessments. Any subjects that cannot or have not been mapped to a Higher Education or VET Course will be taxable unless they are an English Language course, Trade or Professional course or an Adult and Community education course.

2. GST-free education courses

RMIT University only provide education under the following categories which are GST-free:

  • Secondary course
  • Tertiary course
  • Masters or Doctoral course
  • English language course for overseas students
  • Professional or trade course
  • An adult and community education course

2.1. Tertiary course

A Tertiary course would have to be a course of study that has been determined by the Education Minister under subsection 5D(l) of the Students Assistance Act 1973. The procedure for a course to achieve accreditation at RMIT is as follows:

Accredited Higher Education course - The Commonwealth has handed over its accreditation responsibilities to RMIT University. The RMIT Academic Board will register a course. All subjects that make up that course will be included on RMIT’s register. A subject will only be included as part of a course if there is assessment.

Accredited Vocational Education and Training (VET) - courses are GST-free. For a VET course to be accredited, it must be on the National register or a State register Subjects in a VET course will be listed on the National or State register. The subjects will only be included as part of a course on the National or State registers if there is assessment.

2.2. Professional or trade course

Professional or Trade courses will be GST-free if it leads to a qualification that is an essential pre-requisite:

  • For entry into a particular profession or trade; or
  • To commence the practice of (but not to maintain the practice of) a profession or trade in Australia.

2.3. Adult and community education

  • To be classified as an Adult and Community Education course, it must be a course that:
  • •adds to employment related skills of the student;
  • •is of a kind determined by the Education Minister to be an adult and community education course provided by either:
    • a higher education institution; or
    • is recognized by the State or Territory authority that is a provider of courses of a kind described in the determination; or
    • is funded by the State or Territory on the basis that it is a provider of courses of a kind described in the determination; or
  • is determined by the Education Minister to be an adult and community education course.

3. Short courses

Short courses will be GST-free if it includes assessment criteria and if it can be mapped to an accredited course (refer to section 2.0 this fact sheet for accreditation details).

Short courses do not gain GST-free status by allowing the student to qualify for employment. ‘Qualification for employment’ will only be the critical factor if the course, is to be classified as a ‘Professional or Trade course’. Where a course is an accredited VET course it will automatically be GST-free. Therefore, ‘Qualification for employment’ is not a factor that will be required to be consideration.

Australian resident students

1. Introduction

There is no specific GST legislation or rulings in respect of Higher Education. However, the GST legislation does provide that some education courses will be GST free. Discussed below are some expenses and their GST implications, which international students may incur whilst studying in Australia.

2. Tuition fees

Any fees charged by RMIT for an accredited tertiary course will be GST free. An accredited tertiary course is one, which is of a kind determined by the Education Minister under subsection 5D(1) of the Students Assistance Act 1973. English language courses for overseas students are also generally GST-free.

2.1. HECS-HELP liability

HECS-HELP liability will be treated like any other loan and will therefore be input taxed.

2.2. Student fees

Compulsory Non-Academic Fee (CNAF) and Student Services Academic Fee (SSAF) is levied by RMIT to provide facilities, amenities and activities by the Student Unions and is of direct benefit to the students of RMIT University.

It will not be subject to GST based upon the decision of the ATO Private Ruling Number 8117 dated 29 October 2001.

2.3. Administrative fees

If the student enrols in a GST-free course, any enrolment (administrative) services provided by RMIT will also be GST-free. These include the processing of enrolments, any examination arrangements, provision of testamurs or transcripts to students, and lecture notes or course guides provided to students.

2.4. Other University expenses which students may incur

A summary of the fees and charges that may be incurred by students and its GST treatment are as follows:

Fee charged

GST status

Enrolment services

GST free

Photocopying by student

Taxable supply

Printing and laminating for students

Taxable supply

Examination arrangements

GST free

Internet and email services

Taxable supply

Counselling services

Taxable supply

Graduation ceremonies (conducted in Australia)

Taxable supply

Graduation dinner

Taxable supply

Hire of academic dress

Taxable supply

Library charges

GST free

Provision of testamurs and transcripts to students

GST free

Lecture, course notes and guides provided to students

GST free

Recognition of prior learning

GST free

3. Library fines

Library fines imposed by the University will not be taxable under the GST Act i.e. there is no GST charged on such fines. The reason for this is similar to that of late payment of fees. Thus, the issuance of a library fine does not attract GST because it does not constitute a supply for GST purposes. Where there is no taxable supply, no GST will be payable on such fines.

4. Books and stationery

All stationery purchased by the student will be subject to GST. The sale of textbooks to students will constitute a taxable supply and the University will accrue a GST liability, even where the textbooks are for a GST-free education course. This is because textbooks are not “necessarily consumed or transformed” and therefore fail the requirements for GST-free “course materials”. The GST Legislation specifically states that the sale of textbooks will be taxable.

Some textbooks prescribed as recommended reference books for students may allow the student to be entitled to a textbook rebate of 8%. This rebate allows the students to be at a lesser disadvantage after the introduction of GST.

5. Course materials

The sale or provision of “course materials” as defined for subject undertaken in a GST-free education course is GST-free. To be GST-free, the course materials must be supplied by RMIT University or RMIT Training, and the course materials must be necessarily consumed or transformed by the students undertaking the course for the purpose of the course.

The words “necessarily consumed or transformed” may mean that where materials are used up (i.e. where they cannot be re-used) such as where there are notes which have places for students to add information, such items would be considered to be necessarily consumed for the purposes of the GST legislation.

For example, chemicals used in scientific experiments will be GST-free where they are used as part of the GST-free education course. This is because they are “transformed” and take on a new form. However, equipment sold to students would not be considered as “consumed” or “transformed” and therefore would not receive GST- free treatment.

Course materials may include photocopied educational material, art supplies and ingredients used in a science lecture or cooking class, however would not include textbooks or the hire of equipment such as musical instruments.

5.1. GST-free only if University sells the Course Materials

Course materials will only be GST-free if they are supplied by the same entity that supplied the GST-free education course. This means that the course materials will only be GST-free when supplied to the end user.

It must be noted that only bookshops owned by RMIT University will have the chance of providing GST-free course materials. Any other bookshops, which may be situated on campus grounds but are owned by Student Associations or other associations will not be able to provide those same course materials, GST-free.

International students

1. Introduction

There is no specific GST legislation or rulings in respect of Higher Education. However, The GST legislation does provide that some education courses are GST free.

A summary of the fees and charges that may be incurred by overseas students and its GST treatment are as follows:

Fee charged for GST

Status

Enrolment services

GST free

Photocopying by student

Taxable supply

Printing and laminating for students

Taxable supply

Examination arrangements

GST free

Internet and email services

Taxable supply

Counselling services

Taxable supply

Graduation ceremonies (in Australia)

Taxable supply

Graduation dinner

Taxable supply

Hire of academic dress

Taxable supply

Library charges

GST free

Provision of testamurs and transcripts

GST free

Lecture and course notes and guides

GST free

Recognition of prior learning

GST free

2. Accommodation rental, food and other living expenses

(a) Accommodation rental – rental of residential premises will be GST free.

(b) Electricity and telephone – charges for these services will be subject to GST.

(c) Transport – transportation costs such as train, tram and bus will incur GST.

(d) Travel – International travel does not incur GST, treated as an export, domestic travel in Australia will incur GST.

(e) Private Health cover – the purchase of private health insurance is GST free.

(f) Visa extensions and working visa costs – first and second installments for student visa applications will be GST free. Extension to the student visa will not be GST free. Working visas were not granted exemption status and are subject GST.

CRC and in-kind

1. Overview

CRC’s generally require the Universities to make “in-kind” contributions in the way of research staff or equipment to the CRC. The ATO has indicated that in kind contributions will generally be viewed as a barter arrangement for OST purposes as there are two supplies.

An “in-kind” contribution made by RMIT University can be viewed as a two-way transaction:

a. RMIT is “purchasing” a share in the CRC, or more specifically the research results or intellectual property that the CRC may produce; and

b. The CRC is ‘“purchasing” the “in-kind” from RMIT, being, facilities or research services.

RMIT is a participant in several CRCs in respect of research activities. Technically, tax invoices are required to enable GST to be issued in respect of each of the two-way transactions to calculate the GST correctly. RMIT can enter into RCTI agreements to make this process easier.

2. How are in-kind transactions treated?

There is no specific GST legislation or rulings in respect of CRCs or “in-kind” transactions. However Goods and Services Tax Ruling GSTR 2012/2 - Grants of Financial Assistance, indicates that Grants “in-kind” are supplies where they are made in return for another supply (e.g. access to the right to use Research outcomes) and there will be two supplies.

Where CRCs are transacted in-kind, there will be two GST transactions. Hence, GST will be paid by both parties for the supply, and 1/11th of each supply must be remitted to the ATO. However, both RMIT and the other party will be entitled to an input tax credit, hence no real tax liability will exist in the final analysis.

3. Tax invoices and Recipient Created Tax Invoices (RCTIs)

Both RMIT and the other party will be required to issue each other with a tax invoice. To simplify the matter, where both parties are registered for GST, it is suggested that only one party issues a tax invoice, and at the same time issues a RCTI.

Goods and Services Tax ruling GSTR 2013/1 - Tax invoices allows the recipient to issue a document that combines a RCTI and a tax invoice. Therefore, a single tax invoice for both supplies combined on the one document will be in the approved form. However, each entity must account for the full amount of GST payable on the supply that it makes.

To be able to provide a recipient created tax invoice, both the purchaser and supplier will be required to enter into a “Recipient Created tax Invoice Agreement”.

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