Simplified Accounting Methods for GST
Brisbane bookkeeping and accounting use SAM to calculate GST of certain businesses. SAM or simplified accounting methods for GST are applicable to small food retailers and resellers whose GST turnover is below $2 million, who buy and sell products that are both taxed and GST-free at the same time, and do not have a reliable point-of-sale equipment. In this case, computing for the GST payable and credit is complicated.
There are five SAM options to choose from;
1. Business norms method – uses standard percentages to both sales and purchases
This is applicable to certain food businesses with $2 million or less GST turnover and does not have reliable point-of-sale equipment. This method is also the simplest way to calculate GST. Refer to the table below provided by ATO (Australian Taxation Office) for the specific businesses and GST-free percentages to apply.
2. Stock purchases method – uses a sample of purchases
This method is specific for resellers. Resellers are those who buy products and resell them in its same form, without any manufacturing or transformation involved. The business should also be at $2 million or less GST turnover and does not have reliable point-of-sale equipment. Examples are convenience stores, grocery stores, service stations, and health food shops. There are three ways to compute for the GST;
a. Every Tax Period – Add up all GST-free purchases, and estimate sales.
b. Two Four-Week Sample Periods – Both purchases and sales are estimated based on a four-week sample period.
c. 5% GST-free Stock Estimation – Accounting are limited to GST-free items like milk, fresh fruits and bottled water.
3. Snapshot method – uses a snapshot of sales and purchases.
This method is a lot similar to the stock purchases method, but instead of accounting for just the purchases, snapshot method accounts for both sales and purchases. This method applies to entities operating food and retail business with $2 million or less GST turnover and does not have reliable point-of-sale equipment like butchery, cake shop, health food shop, kiosks, sandwich bars, and grocery stores.
4. Sales percentage method – compute for the percentage of GST-free sales and apply this to the purchases
This is most applicable to almost exclusively resellers like convenience stores, grocery stores, and supermarkets. To qualify for this method, your GST turnover should be $2 million or less, converts 5% or less of your products, has a reliable point-of-sale equipment, and is not a petrol station. To get the GST-free tax rate, examine the sales recorded by the point-of-sale equipment. Take the percentage of GST-free sales against the total sales. Apply the same percentage when calculating for the GST-free purchases.
5. Purchases snapshot method – uses a snapshot of purchases to calculate GST credits.
This method of accounting GST is similar to the snapshot method, but instead of accounting both sales and purchases, only purchases are examined and calculated. This is most applicable to food businesses that convert products like restaurants, caterers, and cafes and with GST turnover of $2 million or less. These businesses buy raw materials and food products like meat, vegetables, and rice. And then converts them into food and meals.
Call us to discuss more about the GST, BAS, and tax requirements of your business. We are here to help make your Brisbane bookkeeping, BAS lodging, and business taxation easy, done correctly and on time. We take away the time-consuming and complex part of running a business. So you have time for things that matter to you – like growing the business and spending time with your family.