Petty Cash Finance in Practice, Taxation Unit, GST Team

Transcription

1 Petty Cash Finance in Practice, Taxation Unit, GST Team Custodian/Review Officer: Senior Finance Officer Version no: 3.1 Applicable To: QH staff Approval Date: 27/07/2011 Effective Date: 27/07/2011 Next Review Date: 27/07/2012 Authority: Approving Officer Manager, GST Team Signature Supersedes: 3.0 Key Words: tax, GST, petty cash, tax invoice, mixed supply, supply, statutory declaration, reimbursement, rounding Accreditation References: EQuIP and other criteria and standards 1 Purpose This procedure describes the processes of GST treatment and tax codes for petty cash and to provide information to QH Staff and departments 2 Scope This procedure relates to GST implications and tax codes for petty cash. 3 Supporting Documents References A New Tax System (Goods and Services Tax) Act 1999 Explanatory Memorandum to the A New Tax System (Goods and Services Tax) Act 1999 CCH Response Ref:41920 Other Related References GST Business Procedure Volunteers GST Business Procedure No ABN Withholding 4 Consultation Key stakeholders (position and business area) who reviewed this version are: Manager, GST Team Principal Finance Officer, GST Team Senior Finance Officer, GST Team Version No.:3.1 Effective From: 27/07/2011 Page 1 of 8

2 Contents Petty Cash...1 Introduction...3 Summary of tax codes...3 Petty Cash Forms...3 Requirements...4 Tax Invoice Requirements...4 Non compliant tax invoices...4 Mixed supply...4 Tax Codes...5 Missing Tax Invoices or Receipts...7 Statuary Declarations...7 Reimbursement to Departmental Officers / Volunteers/ Non-employees...7 Rounding...8 Version Control Version Date Author/Reviewer Version Date Author/Reviewer No No 1 20/09/ /07/2011 Malcolm Cope 2 02/03/2007 R.Belton /07/2008 Eman Ajaj 3 15/07/2010 Richard Baker Version No.:3.1 Effective From: 27/07/2011 Page 2 of 8

3 Introduction Petty cash is an advance that is established to fund relatively minor amounts of expenditure for departmental activities. The method in which petty cash operates requires specific documentation to support claims. In order to claim the Input Tax Credits, the A New Tax System (Goods and Services Tax) Act 1999 requires tax invoices for all transactions greater than $82.50 (GST inclusive) to be held. For transactions less than $82.50 (GST inclusive), receipts will be sufficient supporting documentation in order to claim the Input Tax Credits. A Petty Cash Account can also be referred to as an Imprest Account. Summary of tax codes Description Amounts over $82.50 Where a valid tax invoice is received for a taxable supply (>$82.50) Where a valid tax invoice is not received (> $82.50) Amounts under $82.50 Where a valid tax invoice is received for a taxable supply (<$82.50) Non compliant tax invoice < $82.50 require evidence of payment only, eg statutory declaration Reimbursements without receipts or invoices for Travel Expense Claims - to be replaced with an allowance as per FMPM Over or under $82.50 Information Tax Code 10% - GST taxable P0 10% - GST taxable non-deductible no ITC P2 10% - GST taxable P0 10% - GST taxable P0 0% - Out of Scope P9 GST Free /No GST in Price 0% - GST Free P5 Payment of Allowances (not reimbursements of actuals) 0% - Out of Scope P9 Petty Cash Forms Queensland Health staff can access two petty cash templates through the following paths: Petty Cash Voucher: cher.xls Petty Cash Reconciliation Voucher: Each spreadsheet contains instructions for using the Petty Cash Voucher and the Petty Cash Reconciliation Voucher. The Petty Cash Reconciliation worksheet is designed to help simplify the payment of petty cash reimbursements where several dockets or receipts exist for both taxable and GST-free supplies. Version No.:3.1 Effective From: 27/07/2011 Page 3 of 8

4 By using the pivot table the sum total of each distinct cost centre, tax code or general ledger account code combination can be calculated for reconciliation purposes. Requirements The threshold for expenses paid from Petty Cash may vary according to work unit or District necessities. Upon reimbursement for all purchases over $82.50 (GST inclusive), a compliant tax invoice must be presented. In order to claim GST Credits purchases under $82.50 (GST inclusive) do not require a compliant tax invoice but do need to be supported by a sufficient record to substantiate the purchase if input tax credits are being claimed. Tax Invoice Requirements The GST Act requires that a compliant tax invoice for a taxable supply must contain specific information as a minimum requirement. Please refer to the GST Business Procedure: Tax Invoices for further information. Non compliant tax invoices If QH staff use petty cash, a Tax Invoice must be provided by the vendor if GST is charged and the purchase exceeds $82.50 (GST inclusive). If a Tax Invoice is not received, the vendor is required to provide one within 28 days upon written request. A template Request for Compliant Tax Invoice is available on QHEPS. If the tax invoice is not received within 28 days please contact the GST Helpdesk on Mixed supply GST does not apply to all goods and services; some items attract GST and some do not. For example, a QH Officer purchases supplies for morning tea for external clients using petty cash (this has been authorised by a financial delegated officer). The items typically purchased would be: Coffee (GST-free) $8.00 P5 Tea (GST-free) $2.50 P5 Sugar (GST-free) $2.50 P5 Milk (GST-free) $2.50 P5 Biscuits (GST applies) $4.50 P0 The GST applicable $0.45 Total $20.45 When the petty cash purchase is recorded, the document/receipt received at the time of purchase must identify whether an item includes GST or not, i.e. receipts from Coles indicate if items are taxable by placing % in front of each item, while Woolworths use an asterisk (*). All documentation must: Clearly identify each taxable supply Show the total amount of GST payable; and Version No.:3.1 Effective From: 27/07/2011 Page 4 of 8

5 Show the total amount payable. In the morning tea example, there is more than one line item. If each line item is processed separately rounding errors can occur resulting in under or over claiming GST Credits. It is recommended that the formula shown below be used to avoid this. Amount of GST $ 0.45 Total of taxable supplies = GST x 11 $ 4.95 Tax Code P0 Total amount payable $20.45 Total of GST-Free supplies = Total Taxable Supplies $15.50 Tax Code P5 NOTE: If amounts are added individually, rounding problems can occur which may result in over claiming the Input Tax Credits Tax Codes Tax codes are necessary in order to correctly calculate the amount of GST that can be claimed from the ATO as an Input Tax Credit. The above example shows the appropriate tax codes to use in this instance. However, Petty Cash funds may be used for a number of purposes and it is vital that tax codes are used correctly depending upon the application to ensure that: Input Tax Credits are claimed appropriately and opportunities to claim are not overlooked; and Transactions will pass scrutiny and will not invoke any fines or penalties by the ATO to the Cost Centre for over claiming of Input Tax Credits. In deciding the correct tax codes, it will be necessary to give consideration to the following: The ABN/GST registration status of the supplier The type of supply being purchased Whether a compliant tax invoice is held at the time of payment The reason for the purchase (is it a purchase for an Input Taxed supply; i.e. residential rental property) and Who is being reimbursed (if the reimbursement is not to an employee or volunteer, QH cannot claim the Input Tax Credits). Version No.:3.1 Effective From: 27/07/2011 Page 5 of 8

6 Purchases (Non-capital) P0 10% - GST Taxable 10% GST is included in the purchase price of the supply Queensland Health must be in possession of a compliant tax invoice to use this Tax Code which will result in an Input Tax Credit to the Department Supplier must be registered for an ABN & GST Examples: most goods and services, reimbursements to staff when a compliant tax invoice is held P1 10% - GST Taxable Input Taxed Items (no ITC s) 10% GST is included in the purchase price of the supply BUT has been purchased by Queensland Health to provide an Input Taxed Supply Examples: expenses for QH housing such as repairs and maintenance, furniture and fittings may be C1 (depending on value) P2 10% - GST Taxable non-deductible (no ITC s) (Non-compliant Tax Invoices) 10% GST is included in the purchase price of the supply BUT cannot be claimed as an Input Tax Credit Expense is non-deductible for income tax purposes; example: some entertainment expenses Expense includes GST but invoice is Non-compliant for the purpose of claiming Input Tax Credits P5 0% - GST-Free 0% GST included in the purchase price of the supply Examples of GST Free Supplies: education, essential trade training, basic food, water, sewerage, international travel, child care, some medical services and/or supplies etc (per the legislation) Examples of GST Exempt Supplies: Supplier is not registered for ABN, Supplier is registered for an ABN but not for GST, Division 81 payments. P9 0% - Out of Scope The expense is not considered a taxable supply to Queensland Health. A tax code is still required to process these payments (for capital and non-capital purchases) through FAMMIS Examples: internal transactions, allowances paid and reimbursement to non-employees. If a receipt or docket is received from a vendor for less than $82.50 (GST inclusive), then a decision will need to be made regarding the tax implications of the expenditure as this may not be shown clearly on the supporting documentation. Most stationery, for example, will be a "Taxable Supply"; meaning that GST will be paid on the purchase. Most petty cash purchases will be for Taxable Supplies with the exception of basic food (e.g. tea bags, instant coffee, sugar, milk). Most suppliers should also be registered for GST and may provide either a Tax Invoice or a conventional docket. It is important that a description is included on the tax invoice, receipt or cash register docket despite the relaxed rules for purchases of less than $82.50 (GST inclusive). The description may actually be taken from the name on the receipt; eg Kings Car Parking or Gateway Toll, or hand written onto the documentation. Version No.:3.1 Effective From: 27/07/2011 Page 6 of 8

7 Missing Tax Invoices or Receipts Every attempt should be made to obtain a copy of a compliant tax invoice for purchases > $ As mentioned earlier, a supplier has 28 days to supply a compliant tax invoice upon request. Statuary Declarations 1. Reimbursements of greater than $82.50 If an expense, excluding travel expenses, is greater than $82.50 (GST inclusive) and a statutory declaration is used, the expense will need to be coded to the tax code P2 (10% - GST Taxable non-deductible - No Input Tax Credit). A statutory declaration is not sufficient documentary evidence to claim the Input Tax Credit for purchases greater than $82.50 (GST inclusive). 2. Reimbursements of less than $82.50 Given the formalities associated with a statutory declaration, a taxable supply under $82.50 (GST inclusive) which meets the information requirements set out below should satisfy the requirement for a sufficient record. The Input Tax Credit can be claimed unless the expenses are for travel expense claims. The Explanatory Memorandum to the A New Tax System (Goods and Services Tax) Act 1999 (paragraph 7.13) states that when a tax invoice is not provided the recipient should keep a record of: What was purchased From whom it was purchased When it was purchased; and The tax inclusive value of the supply; that is, the consideration for the supply. 3. Reimbursement of Travel Expenses. Queensland Health s Financial Management Practice Manual (FMPM) states that a statutory declaration is not sufficient to support travel expense claims regardless of the amount claimed. If a statutory declaration is produced as evidence of travel expenditure, a travel allowance may be paid instead of an expense reimbursement. In this case, the travel allowance should be coded to P9 (Out of Scope). Reimbursement to Departmental Officers / Volunteers/ Non-employees Input Tax Credits can be claimed if the claimant is a departmental employee, an office holder (e.g. member of Mental Health Tribunal) or an associate of an employee, and a compliant tax invoice is held. Input tax credits can be claimed for reimbursements to volunteers if the claimant is a charitable institution, trustee of a charitable fund, a deductible gift recipient entity (DGR) or government school (s111-18). Version No.:3.1 Effective From: 27/07/2011 Page 7 of 8

8 All QH hospitals have been endorsed by the ATO with DGR status and as such, QH hospital volunteers fall into this category. For further information about when an ABN is not quoted and exceptions to no ABN withholding of 46.5% refer to GST Business Procedure: Volunteers and the GST Business Procedure No ABN Withholding. Queensland Health cannot claim Input Tax Credits on any reimbursements of expenses incurred by individuals on behalf of QH who are not an employee or associate of the department. Input Tax Credits can not be claimed by the department if the purchaser is not an employee, contractor or consultant to Queensland Health (e.g. a member of a District Health Council or a client, patient, member of the public). Reimbursements to individuals not connected with QH are Out of Scope of GST. The correct coding is P9 OUT OF SCOPE - GST 0% Rounding Although the worksheet for the Petty Cash Voucher and the Petty Cash Reconciliation Voucher have formulae to calculate the GST, care should be taken to ensure that rounding does not occur which would result in claiming more Input Tax Credit than the amount shown on the Tax Invoice. The cells are not protected and if an adjustment is necessary, the rounding amount should be added or deducted to the GST Exclusive value. For the latest version of this GST Business Procedure, check the GST site on QHEPS: DISCLAIMER: This procedure is written in accordance with A New Tax System (Goods and Services Tax) Act For further information regarding Queensland Health policies and procedures, the appropriate resources should be researched and/or contacted. Version No.:3.1 Effective From: 27/07/2011 Page 8 of 8