You should already have begun to study the Business Activity Statement (BAS) which is to be submitted by all businesses on a monthly or quarterly basis. When you do, it becomes clear why the Australian Tax Office (ATO) is asking for all the information required (although it does not remove the complexity that we will all face in providing the required information each quarter!). Since GST is a tax accounted for on both the purchase and sales sides of any business (unlike wholesales tax -WST -which is onthe sales side only) the ATO gains valu-able information not just about your turnover but also about your purchasing habits. This information will help themto ruthlessly nail WST criminals.
In boxes G1 through to G4 on the BAS you account for all turnover, including GST where it has been charged, for Australian taxable sales, export sales (which are GST-free), other GST-free sales (like certain foodstuffs), and input-taxed sales (exempt from GST but not GST-free). In this way the ATO can determine your total business turnover. They never had this with sales tax.
In an audit situation, you have to be able to prove that export sales left the country. You also need to be able to produce copy tax invoices to substantiateall purchase and sales for which you accounted for GST. So you can't magically export a whole lot of inventory that you're looking to "lose somewhere".
Credit notes (now to be called Adjustment notes under GST) are shown in a separate box (G7). This means that large confidential discounts, rebates and even genuine mistakes you make will all be obvious to the ATO. If you're passing inter-company credits around to gain a tax benefit, they'll pick it up.
On the purchases side, you show GST on capital purchases separately from GST on "other acquisitions" (which includes trading stock and all other "GST-able" expenses). This means that they can see when you make a large capital purchase. Since boxes G13, G14 and G16 show all your expenses which had no GST element, they also can determine your total cost of sales and expenses. This means that, if turnover for which GST is remitted is less than total costs, you are making a loss. Clearly you cannot trade at a loss for a protracted period and so the ATO islikely to assume that you are instead not declaring all of your sales turnover, in order to pocket the GST. This will appear on an exception report and you'll belikely to be audited (you can imagine how important it is that your accounting system correctly shows capital versus non-capital purchases - imported systems that have not been modified for Australian GST conditions may battle with this).
If you attempt to "double-think" the ATO and reduce not only your declared turnover but also your declared purchases by an equivalent amount to avoid detection, then you are out of pocket by the GST paid on these supplies, since you paid the GST and are not claiming it. In other words you are crooking the ATO out of just 10 per cent of your gross margin, not 22 per cent of your selling price - the amount of potential evasion is a fraction of what is possible under WST. And the threat of the very high penalties for doing this is likely to put a stop to the practice in the market entirely.
As a pure software house, we are not registered for WST and we pay sales tax on all our hardware purchases. When calling for quotes to purchase hardware items, we have often been offered a substantial discount by some IT vendors if we pay with an anonymous cash cheque. In these cases we have simply refused to do business with the vendor because we assume that they are not declaring these sales to the ATO and are pocketing the 22 per cent sales tax component. GST is therefore going to be an excellent leveller in terms of ensuring that previously disreputable companies play the game like the restof us.
While this gives the GST my vote over WST as a matter of principle, it is unfortunate that to achieve these objectives we have ended up with one of the most complex indirect tax forms in the world, in the Business Activity Statement.