Likewise, when Wonder Sports purchases the supplies of 90 rackets, 10 percent is charged on the rackets, but the company can be claiming it as GST credit. Thus, the GST credit claimed per racket is 10 percent of $110. The figure that comes out is $11 per racket. Therefore, for 90 rackets, the GST credit claimed is $990. The GST paid to the tax office by Wonder Sports is the difference between the collected GST and credits paid. Therefore, the figure is $(1,980 – 990) i.e. $990. All these while, 90 rackets are considered, since 10 rackets have been returned and refund obtained. There is also assumption that all the business activities in this case have taken place in the same tax period. The Wonder Sports has been provided with the choice to register as a reasonable amount of fund has been considered for GST, the company would like and being able to claim those credits back.
For Aussie Tennis Goods, it is assumed that their price of selling the ‘sweet spot’ rackets has the GST included in it. That means Aussie Tennis Goods has been paying $10 for each racket as GST. Therefore, for 90 rackets it has paid $900 to the tax office.
The registration for GST should be applied to the Australian Business Register. The arrangement is in place for central collection in relation to the basic information. Thus, to register, Wonder Sports and Aussie Tennis Goods can use PAYG (pay as you go), TFN (tax file number) or ABN (Australian business number).
In case, Wonder Sports and Aussie Tennis Goods can be claiming deduction of income tax for some purchases in relation to the business, the GST credit should be taken off that the companies have the entitlement of claiming. In this way, there cannot be any double-dip. If the purchase is free of GST credit, which means the item is ‘input taxed’, there is availability of the full amount for deduction (Dale 2014). Small businesses like Wonder Sports are liable for a number of tax concessions, the portions of which, is payable by GST installments.
There are exemptions of the GST requirement which does not need the addition of GST on the price of the commodities, although credits can be claimed on the prices where GST are included and bought by that business in making them GST free sales, named as ‘business inputs’. The list of goods and services that are free from the GST includes most foods. Otherwise, farmland, second-hand goods, international travel, medical and health supplies, cars meant for the disabled, precious metal etc. Moreover, the business sales as going concern, does not require the addition of GST. Finally, the ‘input taxed’ supplies, including, selling of residential premises, ATM transactions, loans, rent of residential properties are exempted (Ehrich and Billett 2006). In this case, neither of the companies falls within these categories mentioned (and assumed that they are not going concerns) and thus, they are within the purview of GST.
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