Certainty for business in GST calculations and rounding
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Certainty for business in GST calculations and
rounding
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Media release - 2000/36
Tax Commissioner Michael Carmody today announced details of GST calculation and rounding
options to provide business and GST accounting software developers with both certainty and
flexibility. These options will satisfy ATO tax invoice and liability calculation requirements for the GST.
"Business can now choose the total invoice approach or the line item approach for their GST
calculations," Mr Carmody said.
"The two approaches fit with the flexible new option for GST reporting I announced on 30 March. They
also mirror overseas approaches," he said.
Total invoice approach
A business can total the prices of all taxable items, where the GST is 1/11 of the price, on an invoice
and then make a single 'divide by 11' calculation of the gross taxable amount to arrive at the total
GST. This total will then be rounded to the nearest whole cent. The rounding rule will be: round down
to the nearest whole cent below half a cent; round up to the nearest whole cent from half a cent.
"Many, if not most, businesses will find this the simplest and most certain option," Mr Carmody said.
Line item approach
A business may also calculate the GST on each taxable item or invoice line and add up these
amounts to arrive at the total GST for an invoice or for the total GST liability.
In taking the line item approach a business must record the GST on each taxable item or line of items
to as many decimal points as their system allows. The total GST for the invoice will then be the sum of
the individual line item amounts of GST. Where necessary to get to whole cents, this total will then be
rounded: round down to the nearest whole cent below half a cent; round up to the nearest whole cent
from half a cent.
If the accounting system can only record dollars and whole cents then the amount of GST for each
taxable item or line of items is to be recorded using the rule: round down to the nearest whole cent
below half a cent; round up to the nearest whole cent from half a cent.
"These acceptable approaches may result in differences in liability amounts but the benefits of
flexibility far outweigh any marginal differences," Mr Carmody said.
GST Regulation 29-70 (7) states that "if the total amount of GST payable for the taxable supply or
supplies to which the tax invoice relates is an amount that includes a fraction of a cent, the amount is
to be rounded down to the nearest whole cent".
This regulation is to be changed from the rounding down rule to rounding down to the nearest whole
cent below half a cent and rounding up to the nearest whole cent from half a cent and above.
This regulation currently only covers the effect on a tax invoice. The approaches described will now
also be applicable to the calculation of GST for tax liability and reporting purposes.
"I invite anyone who would like further, personalised information on the BAS and its calculations to call
the Business Infoline on 13 24 78. You can also make an appointment for an advisory visit to their
business premises," Mr Carmody said.
CANBERRA
19 April 2000
For further inquiries from members of the media:
ATO Corporate Affairs
02 6216 1901 (bh)
0401 147 127
For further inquiries from members of the public see the ATO contacts page.
Last Modified: Wednesday, 19 April 2000
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© Australian Taxation Office for the Commonwealth of Australia
http://www.ato.gov.au/corporate/content.aspx?doc=/content/00141278.htm
25/01/2013