TAXATION GUIDE INDEX. ! Statement by Supplier No ABN quoted. 13! PAYG payment summary No ABN quoted PAYG WITHHOLDING NO ABN QUOTED - SECTION 1

Transcription

1 INDEX FORMS PAGE! Statement by Supplier No ABN quoted. 13! PAYG payment summary No ABN quoted PAYG WITHHOLDING NO ABN QUOTED - SECTION 1! Overview 2! Flowchart... 4! Procedures. 5! Guest Speakers. 8! Credit Cards.. 10! Checking an ABN.. 12 PROCEDURES! PAYG Withholding No ABN quoted 5 FLOWCHARTS AND TABLES! PAYG Withholding No ABN quoted Flowchart 4 J:\ADMIN\Policies 2002\Taxation Guide\Current Guide\No ABN quoted for pdf.doc Page 1 of 15

2 PART OVERVIEW Under the Pay As You Go (PAYG) system, the University is required to withhold PAYG tax from certain payments to suppliers for goods or services where no Australian Business Number (ABN) is quoted. The University is required to withhold tax from such payments at the top marginal rate plus the Medicare levy (currently 48.5 per cent in total). Suppliers will be entitled to claim this withheld amount as a credit in their next tax return. Separate procedures will be developed covering situations where payments are made to individuals for living or associated expenses which may be subject to payment through the payroll system. Curtin must withhold 48.5% where: the supplier of the goods or services has not quoted their ABN the ABN quoted on an invoice is false, or is not the real ABN of the supplier the supplier has made a written, signed statement that the supply is private or domestic in nature, or relates to a hobby, or is exempt from income tax, but you have grounds to think the statement is false Exceptions: It will not be necessary to withhold from a payment for failure to quote an ABN if: the payment does not exceed $50 (excluding GST) the payment is not for the provision of goods or services eg scholarships, donations, reimbursement of employees expenses etc. the payee is an individual and the payment is wholly of a private or domestic nature for them Statement by a supplier (Attachment 3) is required the whole of the payment is exempt income of the supplier (for example, the supplier is a charity) - Statement by a supplier (Attachment 3) is required the payee has made a written, signed statement that the supply is private or domestic in nature, or relates to a hobby - Statement by a supplier (Attachment 3) is required In some exceptional circumstances it may not be reasonable to obtain a declaration (eg, goods purchased at a garage sale). Where it is obvious that the supplier is not carrying on an enterprise, it will be sufficient to note the circumstances of the transaction on the documentation. J:\ADMIN\Policies 2002\Taxation Guide\Current Guide\No ABN quoted for pdf.doc Page 2 of 15

3 PART OVERVIEW Format of Declaration: A declaration can be in the form of: a statement on the suppliers invoice; a declaration provided separately by the supplier; or, Australian Taxation Office form, Statement by a supplier as per Attachment 3. If the declaration is provided separately by the supplier, it must contain the following information: the supplier s name and address; a description or document reference relating to the payment; a statement that supplier is exempt from income tax or that the supply is: private or domestic; or, part of a hobby or private recreational pursuit and that therefore an ABN is not required and no PAYG should be withheld; the supplier s signature. Goods in kind: The PAYG withholding provisions apply where the University provides goods and/or services in exchange for goods and/or services provided by another party. For example, the University radio station agrees to provide advertising worth $1,000 in exchange for $1,000 worth of cleaning. If the cleaning contractor does not quote an ABN, the University will be required to remit $485 to the ATO before providing the advertising. Australian Tax Office Ruling: In May 2002 the Australian Tax Office (ATO) issued a Tax Ruling (TR 2002/9) providing guidelines and examples. The paragraphs from the ruling that relate to the University are reproduced at Attachment 1. It is important that staff involved in the payment process are familiar with these additional ATO requirements. J:\ADMIN\Policies 2002\Taxation Guide\Current Guide\No ABN quoted for pdf.doc Page 3 of 15

4 PART FLOWCHART Flowchart: The following diagram should assist in determining when PAYG withholding tax of 48.5% should be applied: Invoice less than $50.00? YES No PAYG GST Input Tax Credit Available (Where Applicable) NO ABN Quoted? YES No PAYG GST Input Tax Credit Available (Where Applicable) NO Resident in Australia? NO No PAYG No GST Input Tax Credit Available YES Completed Statement by a Supplier? YES Not carrying on an enterprise Exempt from income tax Private or domestic supplies Private recreational pursuits or hobbies NO NO YES PAYG No GST Input Tax Credit No PAYG No GST Input Tax Credit J:\ADMIN\Policies 2002\Taxation Guide\Current Guide\No ABN quoted for pdf.doc Page 4 of 15

5 These procedures apply only where payment is being made for the supply of goods and services. Refunds of fees and similar payments not involving the supply of goods and services are addressed in separate procedures. PROCEDURES: Where payment is to be made for goods or services (including re-imbursement of expenses to non-staff) and: no ABN is quoted; the invoice is for more than $50 (excluding GST); the supply is made in Australia; and, no Statement by a supplier or similar declaration is held. 1. Forward to the supplier: the letter at Attachment 2; and, a Statement by a supplier form as per Attachment Upon receipt of the completed declaration, determine whether the University is required to withhold 48.5% tax. Where an ABN or a valid completed declaration is received: If, an ABN is quoted on the response: 48.5% PAYG withholding will not apply GST code should be applied and an Input Tax Credit is available if applicable a copy of the completed form should be attached to the payment documentation If, no ABN is quoted but the supplier has ticked any box on the Statement by a supplier : 48.5% PAYG withholding will not apply no Input Tax Credit will be available and GST code NA should be used a copy of the completed form should be attached to the payment documentation J:\ADMIN\Policies 2002\Taxation Guide\Current Guide\No ABN quoted for pdf.doc Page 5 of 15

6 Where there is any doubt about the taxation treatment of a payment: Where there is any uncertainty regarding the taxation implications/treatment of a payment, the transaction should be referred to the one of the Taxation Accountants in Financial Services for clarification. Filing of completed declarations The original copy of completed declarations should be filed separately within Financial Services. The ATO requires the University to retain copies of these forms for a period of five (5) years. Where an ABN or valid declaration is not obtained: 1. The payment should be reduced by any amount of GST charged on the invoice. It is unlawful for an unregistered supplier to charge GST 2. PAYG withholding of 48.5% is required. If an amount of GST has been excluded from the invoice, the withholding amount is calculated on the reduced amount Example: Supply of 10 $20.00 $ GST $ Total Invoice $ No ABN quoted Payment to supplier: Supply of 10 $20.00 $ Less PAYG withholding ( 97.00) Payment $ No Input Tax Credit will be available and GST code NA should be used 4. A Payment Summary form (Attachment 4) must be prepared in triplicate and the original forwarded to the supplier with payment 5. The duplicate and triplicate copies of completed Payment Summary forms are to be retained by Financial Services J:\ADMIN\Policies 2002\Taxation Guide\Current Guide\No ABN quoted for pdf.doc Page 6 of 15

7 Fortnightly remittance of PAYG amounts withheld: Each fortnight Financial Services will be required to remit PAYG amounts withheld together with payroll PAYG instalments. Therefore each fortnight: 1. Completed Payment Summary forms must be reconciled by Financial Services to the General Ledger clearing account for PAYG withheld 2. Copies of the completed Payment Summary forms are to be filed by Financial Services with a copy of the reconciliation 3. Financial Services will remit the amounts of tax withheld to the ATO fortnightly End of financial year reporting requirements: By 31 October of each year, Financial Services is required to forward to the Australian taxation Office an annual report containing details of No ABN PAYG withholding payments for the previous year ended 30 June. The form is located at J:\ADMIN\Policies 2002\Taxation Guide\Current Guide\No ABN quoted for pdf.doc Page 7 of 15

8 Attachment 1 Extract from ATO Ruling TR 2002/9 (All references are to paragraph numbers in the Ruling) Payments to guest speakers: The ATO initially provided the following information in the draft version of the ruling (TR 2001/D9): A professional accounting association may hold a conference and invite a guest speaker who is carrying on a business as an accountant. The accountant provides his or her services without charge. At the end of the conference, the association may present the speaker with an item in recognition of their efforts such as a bottle of wine or a book valued at more than $55. The accountant may also be reimbursed for airfares or accommodation expenditure. The speaker has made a supply of a service which is considered to be in the course or furtherance of his or her enterprise. In return the speaker receives a payment for that service in the form of the wine or book or reimbursement. The association is not under any contractual obligation to provide the speaker with the wine or book. However, the professional accounting association does receive a material advantage in the form of the accountant's expert services. The wine, book or reimbursement provided to the accountant is not a gift in the true sense of the word. The wine, book or reimbursement is a product in the relevant sense of the accountant's income earning activities and would form part of his or her assessable income. If the accountant failed to provide his or her ABN to the professional accounting association the association would be required to withhold under Division 14 of the TAA This example was not included in the final ruling and it is arguable that an ex-gratia token gift will not be subject to the legislation. J:\ADMIN\Policies 2002\Taxation Guide\Current Guide\No ABN quoted for pdf.doc Page 8 of 15

9 Therefore the following procedures will apply: 1. Where payment is agreed to prior to the services being undertaken, an ABN or Statement by Supplier will be required where the payment exceeds $ Where the speaker is provided with a gift as a token of appreciation, and the value of the gift is minor, no ABN or statement is required. 3. Where the speaker is reimbursed for substantial expenses, an ABN or statement will be required and no GST credit is available even where a tax invoice from a third party (eg hotel) is provided. An exception to this rule is where a staff member is being reimbursed for expenses incurred in carrying out his normal employment duties. An ABN must be held (quoted) when the payment is made 53. To avoid having an amount withheld, the supplier s ABN must be quoted to the payer before or at the time the payment is made. The essential criterion is the payer has the ABN relating to the supply when the payment is made. 56. The term to quote is defined under subsection 995-1(1) of the ITAA That provision provides that to quote an entity s ABN means to quote in a form and manner approved by the Commissioner. The ABN may be quoted in the following manner: in writing; in an electronic document; orally or over the telephone; or on an internet site. An oral quotation would need to be recorded on a document (paper or electronic) held by the payer to satisfy the requirement to hold an ABN on some other document relating to the supply. 62. A document may be in paper or electronic form and will satisfy the requirements where it notifies an obligation to make a payment that relates to the supply. In the context of this provision the quotation will relate to the supply if there is sufficient connection to the supply in question. The Commissioner considers that the following examples would satisfy the requirement to quote an ABN on some other document. 63. Many payers will hold lists of approved suppliers that they purchase goods or services from on a regular basis. The ATO considers that where a payer holds a list of approved suppliers and that list contains the ABN of the supplier, there is sufficient connection with the supply to meet the quotation requirements in subsection (2) where the list is reasonably intended to cover future supplies of that nature. J:\ADMIN\Policies 2002\Taxation Guide\Current Guide\No ABN quoted for pdf.doc Page 9 of 15

10 64. It is reasonable to rely on an earlier quotation (subsection (3)) contained on the list where it relates to periodic supplies. To reasonably rely on this list, it would be prudent for the payer to ensure that the list is checked at least once a year with vendors to ensure currency of the list and that the nature of the supplies to which it will apply is correct. 66. If a supplier gives a quote which forms the basis of an offer that was accepted, the quotation document would satisfy the requirement to quote an ABN on some other document if it contained the supplier s ABN. 67. if an ABN is quoted in these documents (auction catalogue, price lists etc) and an order is made from the catalogue etc this satisfies the requirement to quote an ABN on some other document relating to the supply. 68. Where an entity makes periodical supplies such as leases, quoting the ABN on the lease document constitutes quoting the ABN on some other document. There is no need for the lessor to quote their ABN to the lessee each time rent is paid under the lease. Insurance policies and other general contractual documents would also be considered to fall within the some other document exception. A document setting out the terms and conditions of a relationship would also be sufficient provided that it quotes the ABN. 76. Other documents that will satisfy the provision if they quote the ABN related to the relevant supply and are provided before or at the time of payment include: letterhead (it may be a letter by way of introduction in relation to a product that is subsequently purchased); order form; business card provided in relation to a supply if obtained at or before payment and kept in the records in relation the supply; record of over the phone quotation of the ABN; or or internet record (web page). Credit Card transactions 70. If a purchaser chooses to pay by credit card, they should ensure that they obtain the ABN at or before the time payment is made by ensuring that the ABN is printed on the docket. 71. The ABN may be obtained over the phone if the payer records it in writing. J:\ADMIN\Policies 2002\Taxation Guide\Current Guide\No ABN quoted for pdf.doc Page 10 of 15

11 72. Where the supplier does not provide their ABN or a statement that they are not carrying on an enterprise, the payer should withhold 48.5% of the payment unless one of the exceptions in subsections (4) to (6) of Schedule 1 to the TAA 1953 applies. The amount authorised to be debited to the credit card should only be 51.5% of the total price. It is not the responsibility of the credit card issuer to obtain an ABN from the supplier before transmitting the funds. Therefore the following procedures will apply: When using a University credit card to purchase goods or services a receipt or some other form of documentation must be obtained showing an ABN if the value of the transaction is greater than $50 excluding GST. If no ABN documentation can be obtained, the credit card must not be used to obtain the goods or services. Total value of contracts determines if ABN is required 90. It is the total contract price for the supply that must be considered in determining whether the threshold is met. This means the total payment for the supply, not merely the amount invoiced on an occasion. If the contract price for the supply is $120 and the supplier invoices for the supply over three months with amounts of $40 on each invoice, the payer would still need to obtain the ABN of the supplier in relation to supplies made under the contract or withheld. False or incorrect ABN 120. A payer is not required to check the validity of the ABN on the ABN register. However, if the payer has reasonable grounds to believe that the supplier does not have an ABN or the ABN quoted is not that of the supplier they must withhold. What is reasonable? 121. If an ABN has been quoted to the payer, the payer is not required to withhold unless they have reasonable grounds to believe that the ABN has been incorrectly quoted (subsection (3); (3A) of Schedule 1 to the TAA 1953). J:\ADMIN\Policies 2002\Taxation Guide\Current Guide\No ABN quoted for pdf.doc Page 11 of 15

12 122. For example, if a supplier called himself Jack Brown one day and Tom Smith on another occasion, the payer would be on notice and should make further enquires as to the identity of the supplier or possible agent involved. If the payer s suspicions are aroused they can check the ABN quoted on the ABN register to confirm the registered entity to which the ABN belongs. They can then check with the supplier if there is any discrepancy. Where the supplier provides an unsatisfactory explanation then it would be prudent to withhold Similarly if the same individual has quoted two different ABNs on separate occasions, it would be prudent for the payer to make further enquiries to see if the person is acting as an agent or has more than one enterprise Where the ABN number quoted is suspicious, for example, or then the payer should check the Australian Business Register (ABR) to ensure the ABN is a valid number. An ABN is an 11 digit number - where more or less than 11 numbers are quoted it would be prudent to make further enquires. It should be noted that where an entity has branches, for the purposes of PAYG they may have a payer number that is 14 digits long, the first 11 being their ABN. The supplier may accidentally quote their 14 digit payer number. In these cases, checking with the supplier would seem an appropriate first response when given a 14 digit number. Australian Business Register The ABN for a business may be checked by referring to the Australian Business Register at: J:\ADMIN\Policies 2002\Taxation Guide\Current Guide\No ABN quoted for pdf.doc Page 12 of 15

13 Attachment 2 DATE: (Curtin Letterhead) ABN: TO: Dear Sir/Madam REQUEST FOR AUSTRALIAN BUSINESS NUMBER Invoice Number Amount The above invoices do not comply with Australian Tax Office requirements because there is no Australian Business Number (ABN) on the invoice. If you have charged GST, the University is not required to pay the GST component on the invoice(s). In addition the University is required to withhold tax of 48.5% from payments for goods and/or services where a supplier does not provide an Australian Business Number (ABN) or, a declaration relating to the tax status of the supply of of the supplier. The University is unable to pay the invoices in full until the following has been received: # a Tax Invoice if you are registered for GST; or, # your ABN if you have one; or, # a completed, signed Statement by a supplier if the services provided are not of a taxable nature. Please forward the required information to at the above address or by fax to by (date). If the information is not received by this date a cheque for the amended amount will be forwarded to you. Please ring on 9266 if you require any further information about this request. Yours sincerely J:\ADMIN\Policies 2002\Taxation Guide\Current Guide\No ABN quoted for pdf.doc Page 13 of 15

14 Attachment 3 Blank versions of this form are available at: J:\ADMIN\Policies 2002\Taxation Guide\Current Guide\No ABN quoted for pdf.doc Page 14 of 15

15 Attachment 4 Blank versions of this form are available at J:\ADMIN\Policies 2002\Taxation Guide\Current Guide\No ABN quoted for pdf.doc Page 15 of 15