Getting Sorta Tangled in GST

I have vague memories as a 10 year old of John Howard (aka the man with the eyebrows) bringing some new tax in. By the time I was earning my own money, GST was a normal part of life that I paid very little attention to.

I knew apples and milk weren’t included. I knew the tax was 10%, and didn’t apply to condoms, but up until recently applied to tampons.

When I started my first paid Youth Services job I also knew GST should be listed in a different expenditure column.

No one really explained why or what happens to it. I just presumed the government somehow got the tax and did their thing.

This post is the second in a series about financial leadership from a community sector lens. Read the first post ‘Bringing heart into our finances’ here.

I’m sharing my reflections on financial leadership and trying to demystify some of the key tasks and concepts that I come across regularly.  It’s certainly not intended to be financial advice, just something to spark some thought, especially if you work in the youth and community sector.


About 18 months ago when wrapping up a grant, I couldn’t understand why my total was different to our Finance Officer’s. Our conversations went round in circles for a while.

Turns out grant acquittals use GST exclusive figures.

I’m guessing if I was able to make it to a senior leadership position without knowing that, other people might also be confused about GST.

And I certainly was. I may have learned that GST didn’t get included, but I had no context, no broader understanding, no WHY.


Conveniently I’m dating an Accountant who a) knows what she’s talking about, and b) knows how to explain things to my creative/visual brain.

So here’s an interesting way to conceptualise GST that helped me to understand how it works.

Buckets of tokens!

Pretend you have two empty buckets, one green and one purple. (The colours don’t really matter, I just like them).

Take your green bucket shopping

You need to buy something for your program. Whenever you purchase something, you have to pay GST (unless you’re buying something essential like apples and bread).

Say you buy something that is $110. The thing you bought was worth $100 and the rest is GST.

Whenever you pay GST, you put in a green token of the same value into your green bucket. So, you put a green token worth $10 into the green bucket.

You keep buying things, paying for different services, and continue to put green tokens into the green bucket, tracking how much GST you’re paying (while also keeping receipts as proof).

Keep track with your purple bucket

At the same time, you are running programs and selling things. Every time someone books into your program or buys your stuff, they pay you GST as part of the fee (because you’re registered for the GST). Fun fact – even the Government typically pays GST when they provide grant money. 

Now, it’s really important that you track how much GST you receive, because this money technically doesn’t belong to you – it is owed to the Government. That’s what your purple bucket is for. Whenever you receive GST, you put in a purple token of the same value into your purple bucket.

Counting time

At the end of the Financial Year, you tally up all your tokens. You empty out your green bucket, its contents representing all the GST you paid throughout the year. Your purple bucket tracking the GST received is likely more full than your green one.

All the tokens in your purple bucket you owe to the Government. But, before you pay this to the Government, you can claim your green tokens as GST credits. This means you have permission to take the equivalent number of purple tokens out, which means you pay less to the Govt.

Purple bucket – Green bucket
= GST to pay the Government

(obviously in reality there are no buckets and tokens, but it makes numbers on a page seem more interesting, at least to me).

 

So, how does this show up in a Youth Services context?

Program fees – If you’re running a program where participants paid a fee, you would need to include GST. Either you (as the organisation delivering the program) would receive less of the fee, because you have to pay the Government the GST you collect, or you would need to increase the cost to the participant to include the GST.

Budgets, acquittals etc – All your profit and loss statements, budgets, acquittals will show up as GST exclusive amounts – where the GST is not included. (That’s because the GST is being safely looked after in buckets, by your finance team or accountant).

Receipts – Without a tax receipt, you can’t claim GST credits, so it’s really important to get a tax invoice (not just an EFTPOS receipt) for purchases.

Grants – Most grants are GST exclusive, so when you receive the money in your account it will have GST on top of it. It’s important to check and if it’s not clear, ask whether the grant is including or excluding GST, because this will have an impact on how much you have to spend.

GST calculator – This is just a very handy tool which makes figuring GST out much easier than trying to sums in your head – gstcalculator.com.au

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