Eighteen Things a Principal Needs to know about Tax

1. Eighteen Things a Principal Needs to know about Tax GST & FBT TAX TRAINING Presented by: Greg Hart and Wayne McKenna

2. Objective of this Session • To help you consider the impact of GST/FBT when making decisions • Be proactive with tax, not reactive • Reach the gold standard of tax compliance • Confirm correct tax treatment with your business manager • Ratify your processes and reduce risk in the event of an ATO audit

3. Tax Compliance Unit • Unit within Financial Services Division • Functions • Ensure DEECD’s tax compliance is correct • Support Service to Schools • Who are we? • Irena Kielczynski; kielczynski.irena.e@edumail 9637 3281 • Greg Hart; hart.greg.j@edumail ; 9637 3702 • Contractors DEECD Tax website https://edugate.eduweb.vic.gov.au/Services/Finance/Pages/Tax.aspx

4. Nine Things about GST

5. #1 BAS Lodgement • ATO Portal /ECI /Running Balance Account • Should lodge electronically? Fact sheet available from TCU • BM should check Running Balance Account twice each year • AUSKey certificates in Prin and BMs name • Passwords - Should not be using the previous BM’s or Principal’s. • Principal delegation to BM

6. #2 Tax Invoices • Only need if > $75, but gold standard says always • Rules Correct Name and Matching ABN Date GST Amount or “Total includes GST” Name and address of School (if > $1000) • Discuss where trading name does not match invoice but may nominate the payment to someone else (a third party) • School Purchasing Card – gold standard is to have Statement and Tax invoice

7. Furniture Ltd TAX 11 ABC Road Phone: 999 9999 INVOICE Melbourne VIC 3000 Fax: 989 9999 ABN Number 98-765-432 To: DEECD Date: 1 July 2000 Name & Address of Recipient 1 Spring Street Melbourne. VIC 3000 Quantity Description of Goods and Services Unit Price Total Date of issue 10 Tables $100.00 $1,000.00 Description of Goods & Services Supplied Quantity Supplied Plus Goods and Services Tax $ 100.00 Total Amount Due $1,100.00 Name & Address of Supplier Name & Address of Supplier Supplier Australian Business Number Amount excluding GST GST Charged

8. #3 Staff Reimbursements • Schools can claim GST on staff reimbursements • School must hold tax invoice – staff member must provide tax invoice. If no tax invoice: • Shouldn’t claim GST back, therefore each time it is costing the school 10% extra; or • Claim the GST back puts the School at risk if ATO audit, as no tax invoice held Principals should support Business Managers by facilitating a small presentation to staff @ morning tea encouraging staff to obtain tax invoices

9. #4 Correct Coding in C21 • G11 is the standard code for claiming GST back (must have a valid tax invoice!) • G10 for capital acquisitions • G13 is for input taxed only (canteen, fundraising) • G01 for taxable revenue (camp food etc) • G03 for GST-free revenue (most revenue) • DEECD funding NS6

10. #5 Statement by Supplier • Govt Policy is - preference to deal with suppliers who have an ABN • Otherwise they must sign a SBS • Teachers employed at your school, cannot sign an SBS at your school (eg Active After School) • When can you use them – Discuss scenarios? • Not always a “get out of jail free” card • Use should be limited

11. #6 Contractor v Employee • School nurse, handyman, Caretaker/ Gardener, IT technician, Instrumental Music etc etc • Even if in contract – “can’t contract away your legal entitlements” • Schools must work through “Contractors” fact sheet and then if still unsure, contact TCU. Risk of having to pay SGL, Workcover, Leave entitlements

12. #7 Fundraising • Its complicated and schools should use the GST tax concessions to obtain maximum benefit • Various options/choices to make • Prepare a budget and minute passed through school council • Impacts on Uniform shops, bookshops, Functions, Trivia Nights, Dinner Dances, Fetes, etc • Fundraising Wheel on tax website to help

13. #7a Canteens • Do a budget for your canteen • If profitable, generally run as input taxed • Healthy Canteens, falling enrolments, socio economics could be causing the canteen to run at a loss • TCU recommends that if canteen running at a loss-run as fully taxable, but consider extra admin • TCU fact sheet to schools

14. #8 Deductible Gift Recipients (DGRs) • Building Funds, Library Funds • Special Schools • Scholarship Funds • Must be endorsed by the ATO (see ABN website), separate bank account, separate receipts, limits on use of funds, True donation

15. #9 Grants/Appropriations • School should satisfy themselves about GST treatment of grants they receive. Don’t just accept what the other party says (even DEECD): • Is it a general funding payment – no conditions on use (eg SGB, most DEECD funding) – no GST • Is it a payment for a specific purpose, ie must be used for that purpose (eg C/W grants) - taxable • School can be guided by the box on the DEECD remittance advice – If blank NO GST applies • General discussion-Investing in Schools Grant, BER, NPP

16. Nine Things about FBT

17. #1 When does FBT apply? • In simple terms, FBT will be payable when the “School has PAID” for an Employee or their associate or 3rd party to receive a fringe benefit. • Types of Fringe Benefits: • Car Fringe Benefit (e.g. a school car) • Housing Fringe Benefit (Principal/teacher relocation) • Tax Exempt Body Meal Entertainment: • School Council Dinners • Business Managers cluster Christmas meeting (party) • School Christmas party for staff

18. #2 FBT Tracker • FBT Tracker • Nil Returns • Other benefits • Car benefits • Principal delegation to Business Manager • FBT year: 1 April to 31 March

19. #3 How do schools pay FBT? • School report events on FBT Tracker • At the end of each FBT year school data is collected and paid by DEECD on behalf of the schools to the ATO in May-June • DEECD sends a tax invoice to the school for the amount of FBT

20. #4 How much will it cost ? ROUGH CALCS • A simple but ‘rough’ calculation is to multiply the value, say $100 expense;$100 X 96% = $96 FBT PLUS the original $100 • Therefore TOTAL COST = $196 or whatever portion school has contributed X 96%

21. #5 Some fringe benefits are exempt from tax These include work related items (ie “otherwise deductible”): • Mobile phones (where used primarily for use in employment). • Protective clothing required for employment. • Briefcase, calculators, tools of trade, elect. diary • Laptop computers (limit 1 per FBT year & business use) • Newspapers, Subscriptions to trade or professional journals • Travel costs associated with relocating an employee • Taxi trips beginning or ending at work or taxi trips between work, home or hospital where the employee is sick or injured. • Contributions by an employer to an eligible childcare centre

22. #6 Minor Benefit Rule • Infrequent, irregular • < $300 each inclusive of GST • Difficult to record • Not subject to FBT NB: Schools generally cannot use minor benefit exemption on entertainment – only in limited circumstances

23. #7 When is a car subject to FBT? What is “Private Use”? • Taking school cars home • overnight and • private car use • Home to work travel is private, with some exceptions • Home garaging is therefore (generally) private • If garaged at School will be less likely to be deemed private use • All travel is deemed private unless a log book is maintained • Does you school have a “private use” policy?

24. #8 Entertainment by Way of Food or Drink – TR 97/17 Why Social vs Business What Finger food vs 3 course meal Consumption of alcohol will taint the whole event as subject to FBT File notes are very important DEECD Tax unit undertakes desk audits to verify that Schools’ entertainment expenditure is correctly treated as FBT or otherwise • Where • On site vs Off site • When • Business hours vs After hours • December vs other months

25. #9 Fringe Benefits No FBT FBT (Record on FBT Tracker) Working Bee Any event with alcohol Parent Teacher (onsite) Dinner vouchers Happy Hour (gold coin) Happy hour (no gold coin) Wine to presenters Corporate boxes School Council Dinner (on site) Council dinner (off site) XMAS party (staff pay) Theatre tickets Morning tea (onsite/light refresh) Teacher games expense Shopping complex vouchers Golf days