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FIVE SIMPLIFIED ACCOUNTING METHODS (SMAS) FOR GST PURPOSES

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24
May

Estimating your net GST payable becomes a bit difficult when you deal with both taxable and GST-free sales and purchases. To overcome this impediment, ATO has introduced five Simplified Accounting Methods (SMAs) for GST purposes which are –
1. Business Norms;

2. Stock Purchases;

3. Snapshot;

4. Sales Percentage and;

5. Purchases Snapshot.

If your business turnover is equal to or less than $2 million, you can choose any of the
methods depending on the nature of your business or the nature of your point of sale equipment. Here is a brief description of the methods and how they work –

  • Business Norms: This is the simplest method in which you can estimate your GST-free sales and GST-free purchases by applying standard percentages to your total sales and total purchases for every tax period. These percentages have already been determined by ATO for different types of business. You just need to apply those relevant percentages to your sales and purchases to determine the GST-free amount.
  • Stock Purchases: If you are a reseller but not a converter, you can use this method. There are three ways to apply this method –
  1. Every Tax Period: You need to calculate your GST-free purchase ratio to your total purchase for a whole tax period and then apply the same percentage to your total sales to estimate the GST-free sales.
  2. Two Four-Week Sample Periods: It is the same process as Every Tax Period except that you do not need to calculate for the whole financial year. Calculating for a sample of four-week twice in a financial year will be sufficed to apply to the percentage to determine the GST-free purchases and sales.
  3. 5% GST-free Stock Estimation Basis: If your past or estimated GST-free sales is less than 5%, you can use straight 5% estimation basis to ease the calculation further.
  • Snapshot: This method is similar to that of Stock Purchase method except that you need to calculate the GST-free sales percentage separately as well.
  • Sales Percentage:  This method can be used only if you operate a convenience store or supermarket, you have adequate point-of-sale equipment and you convert 5% or less of your goods into taxable products. You need to track your GST-free sales to calculate the GST-free percentage and then apply that percentage to your purchase to estimate the GST-free purchases.
  • Purchase Snapshot: It is almost similar to Snapshot Method except that it applies to trading stock only. You need to calculate the percentage of GST-free purchases of your trading stock only for a sample of four-week period. Then apply the percentage to your total trading stock purchases to estimate the GST-free purchases.

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