GST performance

$m

1A GST payable

$90

1B GST claimed

$70

G1 Total sales

$1,050

G2 Exports

$25

G3 Other GST-free sales

$35

G10 Capital purchases

$70

G11 Non-capital purchases

$700

Net GST payable/(refundable) (1A -1B)

$20

Total revenue from financial statements

$825

1A on total revenue (Effective GST on sales rate - Unadjusted)

10.91%

Adjusted total revenue

$905

1A on adjusted revenue (Effective GST on sales rate - Adjusted)

9.95%

Total expenses from financial statements

$750

1B on total expenses (Effective GST on expenses rate - Unadjusted)

9.33%

Adjusted total expenses

$705

1B on adjusted expenses (Effective GST on expenses rate - Adjusted)

9.93%

Unadjusted net profit from financial statements

$75

Net GST on net profit (Effective net GST rate - Unadjusted)

26.66%

Adjusted net profit

$200

Net GST on adjusted net profit (Effective net GST rate - adjusted)

10.00%

Item

Description

2019 ($m)

Assurance Rating

Total revenue: financial statements

Total revenue as reported in GAT Pty Ltd's consolidated profit and loss statement for the 2019 financial year.

$825

N/A

Step 1

Grouping variances²

GAT Pty Ltd's consolidated accounting group consists of the following members:

The GST group does not consist of "Services Pty Ltd" which is separately reported for GST purposes. Accordingly, the revenue associated with this entity has been removed from the calculation.

The revenue figure has been extracted from the trial balance listing separated at the entity level, from which we have confirmed that no GST-bearing intragroup transactions have taken place between the entities. Accordingly, we have a high level of assurance over this adjustment.

($15)

Step 2

Adjustments - P&L statement

Exports

Accounting treatment

This revenue stream relates to the supply of goods for consumption outside the indirect tax zone. Export revenue is included as part of total revenue in the financial statements. The financial statements do not distinguish between export and domestic revenue.

GST treatment

Supplies of this nature are GST-free as per Division 38 of the GST Act.

Assurance procedures

As analysed in section 3 of the TAR, sample testing confirmed that export transactions relate to sales to overseas customers and bills of lading confirmed that GAT Pty Ltd was the exporter and goods were exported within 60 days of invoice date.

The $25m adjustment consists of the following accounts nominated by the taxpayer in the trial balance extracted by tax code "S0" (GST export). This figure also matches the annualised amount figure at Label G2 of the BAS.

The high level of assurance obtained is further supported by the high level of assurance obtained in respect of correct reporting and the stage 2 governance rating:

($25)

Step 2

Adjustments - P&L statement

Other GST-free sales

Accounting treatment

The revenue streams below relate to the supply of medical aids included as part of total revenue in the financial statements.

GST treatment

GST-free as per Division 38 of the GST Act.

Assurance procedures

As analysed in section 3 of the TAR, the taxpayer is predominantly involved in the sale of taxable goods however a limited supply of GST-free goods has been identified.

The $35m adjustment consists of the following accounts nominated by the taxpayer in the trial balance extracted by tax code "SX" (GST-free). This figure also matches the annualised amount figure at Label G3 of the BAS.

Our analysis of the product master list has identified one product type as incorrectly classified as GST-free when it should have been classified as taxable. The taxpayer has provided a voluntary disclosure on the shortfall amount and will correct the classification and associated tax coding accordingly. As an error has been identified but is limited to a single product type, we have obtained a medium level of assurance on the GST treatment of this adjustment category.

($35)

Step 2

Adjustments - P&L statement

Interest Income

Accounting treatment

Interest income is included as part of total revenue in the financial statements.

GST treatment

These supplies are input-taxed as per Division 40 of the GST Act.

Assurance procedures

This amount is consistent with Note 2 of the financial statements and trial balance account 0003 (Bank interest revenue). We have been advised that this revenue stream is generated from passive investments. On the basis set out above, we have a high level of assurance over this adjustment.

($10)

Step 3

Capital adjustments

Disposal of assets

Accounting treatment

The gross value of disposal of assets is not recorded on the P&L statement. This figure matches the total disposal value of assets as reported through the Fixed Assets Register and is further supported by proceeds from sale of plant and equipment as disclosed on the Consolidated Statement of Cash Flows for the 2019 financial year.

GST treatment

The sale of fixed assets is predominantly taxable on which GST is payable as per Division 9 of the GST Act.

Assurance procedures

As explained in section 3 of the TAR, a sample of 30% of all capital transactions (by value) were analysed and assessed as correctly treated for GST purposes. On this basis, we have a high level of assurance over this adjustment.

$65

Step 3

Capital adjustments

Gain on sale of assets

This adjustment is related to the disposal of assets. The gain on sale is reported as part of total revenue.

As the gross value of asset sales have been added back to the revenue base, the gain on sale (net position) should be removed. Due to the quantum of the amount during the review period, this adjustment has not been further assured.

If this was a material adjustment, this can be assured directly against the financial statements or underlying trial balance accounts. This adjustment is related to the gross proceeds / cost of capital adjustment as we are adjusting the net figure to the gross figure to match GST reporting.

($5)

IM

Step 3

Adjustments - balance sheet

Accrued Debtors

This adjustment calculates the timing difference between GST attribution on the receipt of invoice versus the accounting recognition when the revenue is recognised.

Accounting treatment

Project revenue is accrued and recognised in the P&L statement but has not yet been billed (i.e. no GST has been recognised) as per AASB15.

GST treatment

As the closing balance exceeds the opening balance, this indicates that there is revenue that has been accrued throughout the year of which GST has not yet been paid. Therefore, a decreasing adjustment to revenue is required.

Assurance procedures

This adjustment has been derived based on the movement in balance sheet account 0112 "Trade debtors - accrued". We have reconciled $20m of the adjustment to the difference between the opening and closing balances in the trial balance. Accordingly, we have a high level of assurance over this adjustment.

($20)

Step 3

Adjustments - balance sheet

Deferred revenue

Accounting treatment

This adjustment relates to advance payments received for maintenance services to be performed in the future. These services are initially recorded as a liability on the balance sheet and are only released to the P&L statement as the service is performed.

GST treatment

As the closing balance exceeds the opening balance, this indicates that there is revenue that has already been received of which GST has been recognised. However, this revenue is yet to be recorded on the P&L statement. Therefore, an increasing adjustment to revenue is required.

Assurance procedures

We have reconciled the $40m amount of the adjustment to the difference between the opening and closing balances. Accordingly, we have a high level of assurance over this adjustment.

$40

Step 4

Other adjustments

Rebates paid to customers

Accounting treatment

Total revenue has been reported net of rebates (per AASB15).

GST treatment

This adjustment involves converting the net amount to gross figures to match GST reporting. The payment of a rebate would result in a decreasing GST adjustment where the taxpayer claims GST credits.

Assurance procedures

As set out in section 3 of the TAR, a sample of 10% of rebates have been analysed which confirms that the taxpayer makes a decreasing GST adjustment by claiming input tax credits at Label 1B of the BAS. The rebates amount has been extracted from Account Code 0010. Accordingly, we have a high level of assurance over this adjustment.

$85

Final adjusted revenue amount

$905

10% of Final adjusted revenue amount

$90.5

Label 1A amount reported for the period

$90

Variance

$0.5

Item

Description

2019 ($m)

Assurance Rating

Total expenses financial statements

Total expenses as reported in GAT Pty Ltd's consolidated P&L statement for the 2019 financial year.

$750

N/A

Step 1

Grouping variances

GAT Pty Ltd's consolidated accounting group consists of the following members:

The GST group does not consist of "Services Pty Ltd" which is separately reported for GST purposes. Accordingly, the expenses associated with this entity have been removed from the calculation.

The expense figure has been extracted from the full trial balance listing separated at the entity level from which we have also confirmed that no GST-bearing intragroup transactions have taken place between the entities.

Accordingly, we have a high level of assurance over this adjustment.

($10)

Step 2

Adjustments - P&L statement

Payroll Expense

Accounting treatment

Employee benefits and payroll expenses are reported as part of total expenses in the P&L statement.

GST treatment

Employee benefits and payroll expenses are not subject to GST and should be removed from the expenses.

Assurance procedures

The value of this adjustment is consistent with the line item "Employee benefits" reported on the consolidated P&L statement.

A full breakdown of this line item was provided as part of the trial balance and is listed below which confirms the amount is fully non-GST bearing.

Accordingly, we have a high level of assurance over this adjustment.

($150)

Step 2

Adjustments - P&L statement

Financing and Investment Costs

Accounting treatment

Finance and interest charges are reported as part of total expenses in the P&L statement.

GST treatment

These supplies are input-taxed as per Division 40 of the GST Act and therefore are not subject to GST.

Assurance procedures

The taxpayer has nominated the following trial balance accounts. The figure is consistent with the value reported at note 4 of the 2019 financial statements.

Accordingly, we have a high level of assurance over this adjustment.

($15)

Step 2

Adjustments - P&L statement

Foreign Exchange Losses

Accounting treatment

This adjustment relates to losses from movements in foreign currency reported as part of total expenses.

GST treatment

These amounts are not subject to GST and should be eliminated from the expense base.

Assurance procedures

The figure is consistent with the value reported at 4 of the 2019 financial statements.

Accordingly, we have a high level of assurance over this adjustment.

($15)

Step 2

Adjustments - P&L statement

Impairment

This adjustment relates to impairment losses which is not subject to GST.

Due to the quantum of this amount, this adjustment has not been further assured.

However, if this amount was material, it can be assured directly against the financial statements or underlying trial balance accounts. The expense is recognised on the P&L statement in relation to a reduction in the asset's book value. The timing of entitlement to GST credits is at the point of acquisition at the asset and there is no impact to GST credits in relation to a change in asset value.

($5)

IM

Step 2

Adjustments - P&L statement

Expenses without GST in the price

Accounting treatment

This adjustment consists of the following trial balance accounts which have been reported as part of total expenses.

GST treatment

These amounts are not subject to GST and should be eliminated from the expense base.

Assurance procedures

The ATO's analysis of trial balance accounts confirms that these items do not include GST in its value.

The ATO's analysis has not identified other accounts to be included in this adjustment.

Accordingly, we have assigned a high level of assurance over this adjustment.

($100)

Step 2

Adjustments - P&L statement

Depreciation and Amortisation Expense

Accounting treatment

This adjustment relates to the removal of depreciation and amortisation expenses from the expense base.

GST treatment

The timing of entitlement to GST credits is at the point of acquisition at the asset and therefore no GST credits are attached to these expenses.

Assurance procedures

The value of adjustment is consistent with "Depreciation and amortisation expenses" reported on the consolidated P&L statement.

Accordingly, we have a high level of assurance over this adjustment.

($50)

Step 3

Capital Adjustments

Cost of purchasing capital or fixed assets

Accounting treatment

The gross value of assets purchased is not recorded on the P&L statement.

This adjustment refers to the gross value of assets purchased during the annual period and has been extracted from the Fixed Asset Register.

The value of the adjustment is consistent with the amount of payments for property, plant and equipment disclosed in the Consolidated Statement of Cash Flows and the annualised Label G10 reported on Business Activity Statements.

GST treatment

The acquisition of assets results in a creditable acquisition in which GST is claimed on the value of assets.

Assurance procedures

As explained in section 3 of the TAR, a sample of 30% of all capital transactions were analysed and assessed as correctly treated for GST purposes.

Accordingly, we have a high level of assurance over this adjustment.

$70

Step 3

Adjustments - Balance sheet

Prepaid expenses

Accounting treatment

The advanced payment of annual insurance is initially capitalised on the balance sheet as an asset and is expensed into the P&L statement overtime.

GST treatment

The GST credits are claimed upon the initial payment of the insurance amount. Accordingly, the GST claimed is reflected in the closing balance on the balance sheet. Therefore, the movement between the closing and opening balance reflects the amount of GST credits claimed on prepayments which have not yet been reflected in the P&L statement.

Assurance procedures

We have reconciled the $10m amount to the difference between the opening and closing balances on the trial balance.

However, the taxpayer has disclosed that only a limited amount is related to taxable general insurance. The prepaid expense amount is undissected and includes payments of health insurance and life insurance which are GST-free and input taxed supplies respectively.

Accordingly, we have low assurance on this adjustment as there is no correlation between the balance sheet movement and the amount of GST credits claimed on prepayments.

$10

Step 3

Adjustments - Balance sheet

Timing adjustment - accrued expenses

Accounting treatment

This adjustment relates to accrued expense which have been incurred but not yet paid or no invoice received. The accrued expenses are recognised on the P&L statement.

GST treatment

As the invoice has yet to be received, GST is yet to be claimed on these amounts. The closing balance of the accruals account reflects expenses recognised on the P&L statement of which GST has yet to be claimed. For the 2019 financial year, the increasing adjustment is a result of the opening balance exceeding the closing balance. That is, GST credits were claimed on expenses in 2019 that were accrued in the previous year.

Assurance procedures

We have reconciled the $90m amount of the adjustment to the difference between the opening and closing balances.

However, the taxpayer has disclosed that the accruals also relate to GST-free expenses of which GST credits were not claimed. This would be impractical to quantify as it requires a transactional level analysis.

Accordingly, we assigned a medium level of assurance for this adjustment.

$90

Step 3

Adjustments - Balance sheet

Timing adjustment - difference between Cost of Goods Sold and stock purchases

This adjustment is aimed at calculating the difference between Cost of Goods Sold (COGS) and actual purchases made throughout the year.

Accounting treatment

The purchase of stock and consumables are recorded on the Balance Sheet as inventory when they are acquired throughout the year. For accounting purposes, they are only reflected as part of COGS in the P&L statement when the stock is sold or consumed.

GST treatment

The timing of the GST claim is at the acquisition date of these expenses. The movement between the closing and opening balance reflects the amount of GST credits claimed on these expenses which have not yet been reflected in the P&L statement.

Assurance procedures

This adjustment is consistent with the vendor report which shows approximately $445m of stock purchases from regular suppliers of inventory and consumables compared to $400m as per the Cost of Goods Sold (difference of $45m).

Accordingly, we have a high level of assurance over this adjustment.

$45

Step 4

Other adjustments

Rebates paid to customers

Accounting treatment

Rebates has been offset against total revenue.

GST treatment

As the taxpayer makes a decreasing GST adjustment and claims input tax credits, this requires an increase to the expense base to accord with GST reporting.

Assurance procedures

As set out in section 3 of the TAR, a sample of 10% of rebates have been analysed which confirms that the taxpayer makes a decreasing GST adjustment by claiming input tax credits at Label 1B of the BAS. The rebates amount has been extracted from Account Code 0010. This also corresponds with the adjustment in relation to the GST payable analysis at section 5.2.

Accordingly, we have a high level of assurance over this adjustment.

$85

Final adjusted expense amount

$705

10% of Final adjusted expense amount

$70.5

Label 1B amount reported for the period

$70

Variance

$.5