Session 17 - 01 01 GST

Summary

The speaker discusses the complexities of the Goods and Services Tax (GST), emphasizing the importance of understanding tax obligations and the challenges that arise in accounting. They provide guidance on identifying non-taxable items, using professional judgment, and the necessity of continual learning and research. The talk also covers the significance of accurate expense classification, the process of reconciling transactions, and the value of questioning and verifying information to avoid mistakes in financial reporting.

Takeaways

• 📚 Comprehensive Understanding: The speaker emphasizes the importance of understanding the GST system deeply, including its complexities and the fact that there will always be uncertainties and questions.
• 🔍 Diligent Research: It is crucial to research and clarify terms that are not commonly known or specific to certain industries, such as 'sewage' and 'drainage', to ensure accurate GST application.
• 🛠️ Practical Application: The training includes a reading activity designed to enhance understanding of GST, with a focus on identifying items not subject to GST and understanding the context in which they are used.
• 🔗 Utilizing Resources: The speaker suggests using online resources and tools like Google to gain a clear picture of unfamiliar terms and concepts related to GST.
• 🏦 Recognizing Taxable and Non-Taxable Fees: The distinction between input taxed items like bank fees and those that attract GST, such as merchant fees, is important for accurate accounting.
• 💳 Merchant Fees Clarification: Every time a credit card is used, a merchant fee may be charged, and it's essential to understand that these fees do attract GST.
• 🔑 ABN Lookup Importance: For new suppliers, especially subcontractors, it's mandatory to verify their ABN and GST registration to avoid future issues.
• 📈 Professional Judgment: The speaker highlights the need for professional judgment in applying GST, especially when dealing with new or smaller suppliers.
• 🧐 Questioning and Challenging: Encourages trainees to question and not blindly follow previous work, promoting individual professional accountability.
• 🔄 Continuous Learning: The speaker stresses the importance of ongoing learning and updating knowledge, even after years of experience in the field.
• 🛑 Escalation and Problem-Solving: If a situation seems complex or unusual, it's important to stop, escalate, and solve the issue rather than proceeding without understanding.

Q & A

What is the main topic discussed in the video script?

The main topic discussed in the video script is an overview of the Goods and Services Tax (GST), its challenges, and the importance of understanding and applying GST correctly in a business context.

What is the purpose of the reading activity mentioned in the script?

The purpose of the reading activity is to deepen the understanding of GST, including items that are not subject to GST, and to familiarize oneself with specific terms and concepts that may be encountered in the process of accounting for GST.

Why is it important to research unfamiliar terms when dealing with GST?

It is important to research unfamiliar terms to ensure a clear understanding of the specific items and services that may be subject to GST, as terms can be very specific and may not always be immediately recognizable.

What is the significance of recognizing that bank fees and merchant fees are treated differently under GST?

Recognizing the difference in GST treatment between bank fees and merchant fees is crucial for accurate accounting and reconciliation. Bank fees are input taxed and do not attract GST, while merchant fees do attract GST, which impacts how they are recorded in financial statements.

What is the role of a payment gateway in the context of merchant fees and GST?

A payment gateway, such as Stripe, IntegraPay, or Square, facilitates credit card transactions. When a business uses a credit card, it may incur a merchant fee, which is typically subject to GST, unlike bank fees.

Why is it necessary to check the ABN (Australian Business Number) of a new supplier?

Checking the ABN of a new supplier is necessary to verify that the supplier is registered for GST and is eligible to claim GST on invoices, which is important for accurate accounting and tax compliance.

What is the importance of professional judgment when dealing with GST?

Professional judgment is important in GST matters because there are often no black and white rules. It allows accountants to make informed decisions based on their understanding of the business and the specific circumstances of each transaction.

What does the speaker mean by 'input tax' in the context of GST?

Input tax refers to the GST included in the cost of goods or services that a business purchases and uses to provide its own goods or services. These are typically not subject to GST if the business is registered for GST.

Why is it recommended to bookmark the ABN lookup tool?

Bookmarking the ABN lookup tool is recommended for quick and easy access when verifying the GST registration status of suppliers, especially new or unknown ones, to ensure compliance and accuracy in accounting.

What is the significance of understanding the nature of an expense when processing bills for GST?

Understanding the nature of an expense is crucial for determining whether it is a cost of sales, an asset, or an expense that will provide benefit over a longer period. This affects how the expense is recorded and treated for GST purposes.

Why is it important for accountants to question and verify the work of others, even if they are new to the job?

It is important for accountants to question and verify the work of others because everyone can make mistakes. By taking accountability for their own work and not relying solely on others, accountants can prevent errors from propagating through the system.