How The One Elenth Rule Works

Version No.: 4.
1; Effective From: 10/08/2012 Page 1 of 10

Printed copies are uncontrolled

When GST is not 1/11th of the Total Price
Finance in Practice, Taxation Unit, GST Team

1 Purpose
This procedure describes the processes of GST treatment
and tax codes when GST is not 1/11
th
of the Total Price
and to provide information to QH Staff and departments.

2 Scope
This procedure relates to GST implications and tax codes
for when GST is not 1/11
th
of the Total Price.

3 Supporting Documents

References

A New Tax System (Goods and Services Tax) Act
1999 - Division 99 Deposits as security
GSTR 2006/2 - Deposits held as security for the
performance of an obligation

Other Related References

Customs Tariff Act 1995
A New Tax System (Goods and Services Tax) Act
1999 - Section 87-5 Long Term Accommodation in
Commercial residential premises
GSTR 2000/20 Commercial Residential Premises

Related Business Procedures

GST Business Procedure Importations
GST Business Procedure - Accommodation
Commercial & Non-commercial residential
GST Business Procedure - Deposits

4 Consultation

Key stakeholders (position and business area) who
reviewed this version are:

Director, Taxation Unit
Manager, GST Team
Senior Finance Officer, GST Team
Custodian/Review Officer: Manager,
GST Team

Version no: 4.1

Applicable To: All staff in QH divisions
and Commercialised Business Units as
well as Hospital and Health Service staff.

Approval Date: 10/08/2012

Effective Date: 10/08/2012

Next Review Date: 10/08/2015

Authority:

Approving Officer: Director, Taxation
Unit

Signature

Supersedes: 4.0

Key Words: tax, GST, 1/11
th
, imported
goods, accommodation, commercial,
residential, premises, mixed supply,
deposit, balance of account

Accreditation References:
EQuIP and other criteria and standards

Queensland Health Procedure: When GST is not 1/11
th
of the Total Price

Version No.: 4.1; Effective From: 10/08/2012 Page 2 of 10

Contents

Introduction .......................................................................................................................... 3
Imported Goods ................................................................................................................... 3
GST registered suppliers submitting an invoice for GST only .............................................. 3
When providers of long-term accommodation in commercial residential premises choose
to charge GST at the concessional rate ............................................................................... 4
When the invoice is for a mixed supply ................................................................................ 5
Payment of deposits and balance of accounts ..................................................................... 6
Security Deposits ................................................................................................................. 7
Prepayments ........................................................................................................................ 7
Where suppliers make mistakes .......................................................................................... 8
When QH has not charged GST previously ......................................................................... 9
When QH was charged GST and is now being refunded..................................................... 9

Version Control

Version
No
Date Author/Reviewer Version No Date Author/Reviewer
1 21/05/2003 4.1 15/6/12 Malcolm Cope
2 17/08/2007 Christine Mardon
3 10/06/2008 Erin Sluyters
4 10/12/2009 Richard Baker

th
of the Total Price


Introduction

There may be instances when the GST on an invoice will not be 1/11
th
of the total price.
For example, a supplier may not charge GST and then invoice Queensland Health (QH)
separately for the GST amount only. Due to the way FAMMIS tax codes work, it is not
possible to post the invoice in the normal way, and special rules need to be followed as set
out in this business procedure.

The taxable FAMMIS tax codes (P0, S0, and C0) all take 1/11
th
of the total price and post
it to the GST account as follows:

Example How the system posts GST
An invoice is received by QH for $1100 (for one item) including GST of $100.

When the invoice is processed on the system, the GST inclusive amount of $1100 using a
P0 tax code will be entered. This tax code will automatically take one-eleventh of the total
($100) and post it to the GST account and recognise the $1000 as an expense in the
general ledger account and cost centre that were allocated.

However, if an invoice is received for $2,200, which only includes $100 GST, the whole
amount could not be processed using tax code P0 because the system would
automatically post $200 to the GST account and not the $100. See section When the
Invoice is for a Mixed Supply.

Imported Goods

When goods are imported directly from an overseas supplier, no GST will be charged by
the supplier of the goods as they are not registered for GST in Australia. When the invoice
is received it must be processed as no GST in the price.

However, when the goods are received into Australia, Customs will assess them for import
duty and charge QH GST on the inclusive value of the goods (including any duties) if they
are taxable.

The invoice QH receives from Customs will therefore be for the GST amount and import
duty, and the GST will not be 1/11
th
of the total of the invoice.

The tax codes to use are:

Description Tax Code
Goods imported directly to
Australia
P5/C5 No GST in price @ 0% GST from Overseas
Supplier
Customs GST only invoice Refer to example in next section

Refer to Business Procedure Importations for further information

GST registered suppliers submitting an invoice for GST only

Some suppliers may neglect to charge GST and later invoice QH for GST only.

th
of the Total Price


If the original invoice has not been paid, then staff can reverse the original invoice
(which would have had a P5 allocated to it as it would not have included any GST), and
then post the total of the two invoices again using a P0 code. The amount on the system
would then match the invoices received from the supplier.

If the invoice has already been paid, then staff will need to post the GST only invoice;
i.e. the invoice should be entered as three lines (or more if multiple Cost Centre / account
code combinations were involved), as shown below using $100.00 GST as an example:

Line 1 The amount that will be paid to the vendor, which is the difference between
Line 2 & Line 3. A posting key of 31 (credit entry) should be used.
Line 2 - Recording the taxable value of the GST amount. This will be an amount
calculated as 11 times the value of the GST. A posting key of 40 (debit entry) should be
used; and
Line 3 An adjustment to the total GST inclusive value, calculated at 10 times the
value of the GST to be paid. A posting key of 50 (credit entry) should be used.

Posting
key
Description Tax code Amount $ - Dr Amount $ - Cr
31 Vendor / supplier ** $100.00
(Amount of GST)
40 Taxable value
including GST
P0 $1,100.00 (GST x 11)
50 Adjustment of GST
status
P9 $1,000.00
(GST x 10)
TOTALS $1,100.00 $1,100.00

When providers of long-term accommodation in commercial residential premises
choose to charge GST at the concessional rate

When at least 70% of the bookings in commercial residential accommodation are supplied
for 28 days or more the premises are classified as long-term accommodation.

Therefore as per Section 87-5 of the GST Act, the value of the supply of accommodation
for 28 days or more is reduced for GST purposes to 50% of its inclusive price.

It should be noted that Queensland Health can request that the supplier charge GST at the
normal rate of 10% as this results in less administration work and QH can claim the ITCs.

Example:
The Inn is a well-established bed and breakfast venue which charges a GST inclusive
nightly rate of $110.00. The owner, when working out the GST applicable to individuals
who have predominantly long-term accommodation, takes 50% of what the normal fee
would be (50% of $110 is $55), then applies GST at the rate of 10% to that amount. GST
is $5.50.

th
of the Total Price


The long-term charge is $105.50 per night ($100 plus $5.50 GST) for those days stayed
over 27 days.

27 days @ $110.00 $2,970.00 (GST inclusive)
16 days @ $105.50 $1,688.00 (GST inclusive)
Total of invoice $4,658.00
Amount of GST $358.00

Refer to Business Procedure Accommodation Commercial & Non-commercial
residential

As the GST is not 1/11
th
of the inclusive value, the supplier will be required to state the
amount of GST on the invoice and the transaction will need to be split in FAMMIS as
follows:

Line 1 The amount that will be paid to the vendor, which is the total of the invoice. A
posting key of 31 (credit entry) should be used.
used.
Line 3 Recording the GST-free portion of the total invoice. A posting key of 40 (debit
entry) should be used and will be calculated by subtracting the taxable value from the
total value of the invoice.

Posting
key
Description Tax
code
Amount $
Dr
Amount $
Cr
31 Vendor Account ** $4,658.00
40 Accommodation
account
P0 $3,938.00
(GST x 11)

40 Accommodation
account
P5 $720.00
(GST incl amount taxable
amount)

TOTALS $4,658.00 $4,658.00

When the invoice is for a mixed supply

Where a transaction involves a combination of taxable supplies and GST-free, input taxed
or out of scope supplies, the tax invoice must clearly identify each taxable supply and
show the total GST payable and the total amount payable.
1

Care should always be taken to ensure that QH does not over claim Input Tax Credits.

It is not always possible to use the methods which have been previously covered in this
Business Procedure; i.e. apply one line item for the taxable portion and one line item for
GST-free portion of the invoice. For example, there are various general ledger account
codes for different food types. The table below is taken from the departments Chart of
Accounts.

1
CCH Australian Master GST Guide
th
of the Total Price


In these situations and those that may also apply to purchases of medical aids, appliances
and medical drugs, it will be necessary to apply the tax code as indicated on the suppliers
invoice, per line item.

However, if payment is being made via a General Purpose Voucher for a mixed supply,
then the following method can apply.

An invoice is received for $1,200.00 (GST inclusive) including $55.30 GST, the amount of
GST is not 1/11
th
of the GST inclusive price and payment could be processed as follows:

used.
Line 3 Recording the GST-free portion of the total invoice. A posting key of 40 (debit
entry) should be used and will be calculated by subtracting the taxable value from the
total value of the invoice.

Posting
key
Description Tax
code
Amount $
Dr
Amount $
Cr
31 Vendor Account ** $1,200.00
40 Taxable items P0 $608.30
(GST x 11)

40 GST-FREE ITEMS P5 $591.70
(GST incl amount taxable amount)

TOTALS $1,200.00 $1,200.00

Payment of deposits and balance of accounts

GST Law draws a distinction between a security deposit and a prepayment, both of
which are commonly referred to as deposits. Generally, a prepayment is when part of the
cost of a supply is paid before the rest, and the balance is paid later. A security deposit is
a payment which is held by the supplier until some other event occurs. At that time the
supplier may refund the deposit, they make keep it and make no supply or they may keep
it and charge the balance on the supply.

th
of the Total Price


Security Deposits

Because the fate of a security deposit is not known at the time of payment, the transaction
is considered out of scope for GST purposes - Tax Codes S9 for revenue and P9 for
expenditure. Upon the recipient performing its obligations, the supplier is obliged either to
apply the deposit for the recipient's benefit, usually by applying it towards the total
purchase price of the supply, or by returning it to the recipient.
2
It is when the deposit
becomes part of the total price for the supply that it will take on the GST status of the
supply.

Example:

Queensland Health is arranging a conference to be held off site. The GST inclusive cost of
hiring the venue is $2,860.00. A security deposit of $500.00 has been paid (Tax Code P9)
with the balance of $2,360.00 payable one week prior to the event. If QH does not
complete the purchase, the $500.00 will be forfeited. The invoice from the supplier will
show that $260.00 represents the amount of GST included. This amount is greater than
1/11
th
of $2,360.00 and if the invoice was processed using tax code P0, Queensland
Health would only be claiming an Input Tax Credit of $214.55.

When processing the balance of the amount payable, follow the method as shown below:

calculated as 11 times the value of the GST which will be greater than the amount to
be paid. A posting key of 40 (debit entry) should be used.
Line 3 Recording the amount of the deposit which has been previously paid. A
posting key of 50 (credit entry) should be used. This will result in the correct amount of
GST being claimed and the correct amount being paid to the vendor

Prepayments

Once a payment has been made which is definitely part of the consideration for a supply,
the supplier becomes liable to the ATO for the GST payable on the entire price of the
supply.

2
GSTR 2006/2 Deposits held as Security - Para 28
Posting
key
Description Tax
code
Amount $
Dr
Amount $
Cr
31 Vendor ** $2,360.00
(Balance to be paid)
40 Total amount paid for
supply of conference venue
P0 $2,860.00
(GST Inclusive
amount, incl. deposit)

50 AMOUNT OF DEPOSIT
PREVIOUSLY PAID
P9 $ 500.00

TOTALS $2,860.00 $2,860.00
th
of the Total Price


The supplier may therefore issue an invoice for the amount of the prepayment plus the
entire GST on the supply. Provided the invoice is a compliant Tax Invoice, QH can then
claim the entire amount of GST as well.

Example: QH enters into an agreement to purchase kitchen equipment. The total price of
the purchase is $55,000 inclusive of GST, with a $10,000 prepayment requested. The
supplier issues QH a compliant Tax Invoice for the $10,000 prepayment and the $5,000
GST on the purchase. QH is therefore entitled to claim the entire amount of GST.

The initial payment should be processed as follows:

Line 2 Recording the taxable value of the GST amount. This will be an amount
calculated as 11 times the value of the GST which will be greater than the amount to
be paid. A posting key of 40 (debit entry) should be used.
Line 3 A balancing line indicating the amount which remains to be paid. A posting key
of 50 (credit entry) should be used. This will result in the correct amount of GST being
claimed and the correct amount being paid to the vendor.

When the balance of $40,000 is paid, it should be processed using Tax Code P9 so that
no further input tax credits are claimed:

Where suppliers make mistakes

Where suppliers make mistakes in calculating the GST on their invoices, the total amount
of GST may not be 1/11
th
of the total of the invoice. In these circumstances staff should
attempt to contact the supplier involved and ask them to re-issue a corrected invoice. The
incorrect invoice should not be posted on the system.

Posting
key
Description Tax
code
Amount $
Dr
Amount $
Cr
31 Vendor ** $15,000.00
(Total initial payment)
40 Total amount paid for supply
of equipment
P0/C0 $55,000.00
(GST Inclusive
amount, incl. deposit)

50 AMOUNT REMAINING TO BE
PAID
P9 $ 40,000.00
(Total price less initial
payment)
TOTALS $55,000.00 $55,000.00
Posting
key
Description Tax
code
Amount $
Dr
Amount $
Cr
31 Vendor ** $40,000.00
(Payment of balance)
40 Total amount paid for supply
of equipment
P9 $40,000.00
(Amount of balance)

TOTALS $40,000.00 $40,000.00
th
of the Total Price


When QH has not charged GST previously

There may be instances where QH has issued an invoice and mistakenly not charged any
GST (i.e. the invoice was posted as S5 or S9 tax code). In this case QH is required to
raise a customer invoice for GST ONLY. Do not reverse the original invoice and attempt to
re-issue as payment may be received for the original invoice at any time.

The GST only invoice will need to be posted as two lines (or more if multiple Cost Centre /
account code combinations were involved), as follows:

Example:

An invoice was originally issued for $1,000 using tax code S5. It was then discovered that
GST should have been charged. Therefore an invoice is to be raised for $100 being the
GST that should have been added. The entire amount of $100.00 is GST payable to the
Australian Taxation Office. As postings cannot be made direct to GST accounts, the
following entry applies:

Line 1 The GST amount paid to QH;
calculated as 11 times the value of the GST to be received. A posting key of 50 (credit
entry) should be used; and
Line 3 - An adjustment to reverse the GST-free recording of the recipients previous
invoice, calculated at 10 times the value of the GST to be paid. A posting key of 40
(debit entry) should be used.

Posting
key
Description Tax
code
Amount $ Amount $
21 CLIENT DETAILS ** $100.00
50 Taxable value including GST S0 $1,100.00
(GST x 11)
40 Adjustment of GST status S5/S9* $1,000.00
(GST x 10)

TOTALS $1,100.00 $1,100.00
* determined by the tax coding of the original invoice.

When QH was charged GST and is now being refunded

Sometimes a supplier may charge GST and then later determine that it should not have,
for example if the supplier was not registered for GST. QH may then receive a payment
constituting a refund of the GST paid.

In order to ensure that the GST that was claimed is returned to the ATO, the full GST-
inclusive amount of the original payment must be credited to P0, and the exclusive amount
debited to P5.

th
of the Total Price


Example:

A doctor contracted to a hospital issues a Tax Invoice to QH for $1,000 plus $100 GST.
Later, the doctor realises she is not registered for GST and returns the $100 to the
hospital.

The journal for the receipt of the $100 should debit and credit the expense account
originally used for the payment and should be in the following form:

Line 1 The GST amount refunded to QH;
Line 2 Crediting P0 reverses original payment debited to P0. GST inclusive value of
original payment should be used so that GST effect of original payment is reversed.
Line 3 Debits the GST exclusive value to P5.

Posting
key
Description Tax
code
Amount $ Amount $
21 VENDOR DETAILS ** $100.00
50 Taxable value including GST P0 $1,100.00
(GST x 11)
40 Adjustment of GST status P5 $1,000.00
(GST x 10)

TOTALS $1,100.00 $1,100.00

DISCLAIMER: This procedure is written in accordance with A New Tax System (Goods and
Services Tax) Act 1999. For further information regarding QH policies and procedures, the
appropriate resources should be researched and/or contacted.

For the latest version of this GST Business Procedure, check the GST site on
QHEPS:
http://qheps.health.qld.gov.au/financenetwork/taxation/web_pages/gst/gst_bus_pro.htm

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Version No.: 4.

1; Effective From: 10/08/2012 Page 1 of 10

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