GST Performance and Profile

Net GST amount (1A - 1B)

$20

1A GST payable

$90

1B GST Paid

$70

Financial Statement Performance (prior to adjustments)

Total Revenue

$825

Effective GST on revenue rate

10.91%

Total Expenses

$750

Effective GST on expenses rate

9.33%

Total profit

$75

Effective net GST rate

26.66%

Item / Adjustment

How adjustment identified/calculated including evidence if available

2019 ($m)

Observations

Total revenue: financial statements

Statutory financials 2019

$825

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

Step 1

Grouping variances

Full trial balance (entity level)

($15)

Revenue from entities not included in GST group.

Step 2

P&L statement: Exports

Trial balance: tax code (S0)

BAS G2 labels

($25)

Exported goods identified from P&L using specific tax code S0.

P&L statement: GST-free sales

Trial balance: tax code (SX)

BAS G3 labels

($35)

Some concerns identified

This adjustment refers to the removal of sales of medical aids. These sales transactions are GST-free as per Division 38 of the GST Act.

This figure matches up with total value of GST-free goods in the trial balance: tax code (SX). This figure also matches the annualised amount figure at Label G3 of the BAS.

Refer to "Conclusion and next steps" for more information.

P&L statement: Interest Income

Statutory financials: Note 2

Trial balance account 0003 (Bank interest revenue)

($10)

Removal of input taxed financial supply income (interest).

Step 3

Capital adjustments - Sale of fixed assets

Fixed Assets Register

Consolidated Statement of Cash Flows 2019

$65

Include gross proceeds on taxable sale of fixed assets

Capital adjustments - Gain on sale of fixed assets

Fixed Assets Register

($5)

Reverse net accounting gain recognised in respect of sale of fixed assets

Balance sheet: Accrued Debtors

Balance sheet account 0112 (Trade debtors accrued)

($20)

Reverse income recognised in P&L in respect of goods and services not yet supplied

Balance sheet: Deferred revenue

Balance sheet account 0740 (Deferred revenue)

$40

Include income received but not yet recognised in the P&L

Step 4

Other adjustments - Rebates paid to customers

Trial Balance account 0010 (Rebates)

$85

Adjustment to reverse the impact of rebates in reducing income. NB. There is an equal and offsetting adjustment at Step 4 on the expense side. This adjustment shifts the impact of rebates to the expense side.

Final adjusted revenue

$905

Effective GST revenue rate

9.95%

Item / Adjustment

How adjustment identified/calculated including evidence if available

2019 ($m)

Observations

Total expenses financial statements

Statutory financials 2019

$750

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

Step 1

Grouping variances

Full trial balance: entity level

($10)

Expenses from entities not included in the GST group.

Step 2

P&L statement: Payroll Expense

Consolidated P&L statement Employees benefit

Trial balance accounts (various)

($150)

Salaries and wages to employees (not subject to GST).

P&L statement: Financing and Investment Costs

Statutory financial statements

Trial Balance accounts: 2010, 2011

($15)

Bank interest expenses and Bank account keeping fees.

P&L statement: Foreign Exchange Losses

Statutory financial statements

($15)

No GST included in these items.

P&L statement: Impairment

Statutory financial statements

($5)

No GST included in these items.

P&L statement: Expenses without GST in the price

Trial Balance accounts (various)

($100)

These adjustments were identified from a data analytics exercise which identified transactions with no GST included. The 20 highest values were sample checked to source documents which confirmed that most were out of scope transactions (eg transfer journals).

P&L statement: Depreciation and Amortisation Expense

Consolidated profit and loss statement

($50)

No GST included in these items.

Step 3

Capital adjustments: Cost of purchasing capital or fixed assets

Fixed Asset Register

Consolidated Statement of Cash Flows

BAS Label G10

$70

Acquisitions which give rise to an ITC but not included as an expense in the P&L

Timing adjustment - Prepaid expenses

Trial Balance account 0740

(Prepaid Expenses)

$10

Some issues identified

This adjustment refers to advanced payment of annual insurance, where GST credits was claimed on the initial payment of the insurance, but the amounts have not yet been reflected in the P&L statement.

The increasing adjustment is a result of the closing balance exceeding the opening balance, that is GST credits claimed on prepayments which have not yet been reflected in the P&L statement.

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.

Timing adjustment - accrued expenses

Trial Balance account 0743 (Accrued Expenses)

$90

This adjustment relates to accrued expenses or provisions which have been incurred but not yet paid or no invoice received. The accrued expenses are recognised on the P&L statement. As the invoice has yet to be received, GST is yet to be claimed on these amounts.

For the period ending 30 June 2019, the increasing adjustment is as 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.

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 detailed transactional level analysis.

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

Trial Balance accounts 0500 & 0501 (Inventory and Consumables)

$45

ITC entitlement arises in respect of stock purchases however P&L will show COGS so this adjustment is the difference between purchases and COGS.

Step 4

Other adjustments - Rebates paid to customers

Trial Balance account 0010 (Rebates)

$85

Offsetting adjustment for rebates treated as a reduction in income. (Offsetting adjustment to income side)

Final adjusted expenses

$705

Effective GST expense rate

9.93%

Financial Years

2019

Final adjusted revenue

$905

1A GST payable

$90

Effective GST sales rate

9.95%

Final adjusted expenses

$705

1B GST Paid

$70

Effective GST expenses rate

9.93%

Final adjusted profit

$200

Net GST amount (1A -1B)

$20

Effective net GST rate

10.00%

Unexplained dollar value variance (Net GST)

$0