Martin runs a small second-hand jewellery shop in Sydney and provides specialised advice on all purchasers. Martin employs two part-time staffs and is registered for the GST.

For the tax period ending 31 March 2022 quarter, Martin reported the following transactions and uses the cash basis of accounting for GST.

Sales (inclusive of GST where appropriate)

Cash sales $83,000

Credit sales outstanding $33,000

Gift vouchers issued $12,000

Cash payments(expenses) (inclusive of GST where appropriate)

Purchases $13,000

Staff salaries $25,000

Staff superannuation $2,500

Electricity $990

Gas heating $880

Telephone $440

Prepaid telephone card $200

Additional information:

a) All tax invoices are held where appropriate.

b) Martin made the following Purchases($13,000) for the business:

• Purchased Twenty (20) second-hand items for a price of $210 each from various persons (none of whom are registered for GST).

• Purchased Ten (10) second-hand items for a price of $880 each from a person who was also not registered for GST.

c) The approximately gross profit margin from selling the second-hand items is 500%.

d) Prepaid telephone card: Martin purchased a prepaid phone card for $200 on 1 March 2022 for his son to allow him to contact him while he is on a school excursion in Melbourne.

Required:

Please show all working citing relevant authorities.

a) Advise Martin whether he is eligible to use the cash basis of accounting for GST.

b) Assume the cash basis is appropriate to account for GST. Calculate the net amount for the tax period ending 31 March 2022 quarter. (13 Marks)

c) Assume Martin owns a rental property. Advise Martin whether GST is required to be added and remitted to the ATO when he derives the rental income and whether input tax credits would be available when he incurred the expenses on the rental property.

Answer rating: 100% (QA)

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