WorkCover Finance in Practice, Taxation Unit, GST Team Custodian/Review Officer: Manager, GST Team Version no: 3.1 Applicable To: All staff in QH divisions and Commercialised Business Units as well as Hospital and Health Service staff. Approval Date: 10/08/2012 Effective Date: 10/08/2012 Next Review Date: 10/08/2015 Authority: Approving Officer: Director, Taxation Unit Signature Supersedes: 3 Key Words: tax, GST, purchase order, PO, requisitions, purchasing, general purpose voucher, GPV Accreditation References: EQuIP and other criteria and standards 1 Purpose This procedure describes the processes and GST treatment for WorkCover Invoices. 2 Scope This procedure relates to GST implications and tax codes for WorkCover Invoices. 3 Supporting Documents References A New Tax System (Goods and Services Tax) Act 1999 Private Ruling 49479 11/02/05 GST & Hospital services and workers compensation Other Related Research Fact Sheet - Human Resource Business Centre SSP Corporate and Statewide Information about Workers Compensation OHSMS 3-8#38 WorkCover Declaration of Wages Procedures, Occupational Health and Safety Management System 4 Consultation Key stakeholders (position and business area) who reviewed this version are: Director, Taxation Manager, GST Team Senior Finance Officer, GST Team Version No.: 3.1 Effective From: 10/08/2012 Page 1 of 5
Content Introduction... 3 Summary of Tax Codes and Stamp Duty... 3 Components of the WorkCover Invoice (Initial Renewal Notice)... 3 1 Annual Premium... 3 2 GST... 3 3 Stamp Duty... 3 Processing the WorkCover Invoice... 4 FAMMIS Tax Coding of the Invoice... 4 Revenue related to Work Cover... 5 1 Work Cover for patients... 5 2 Supply of services such as Medical Records to Work Cover... 5 3 Work cover for staff wages... 5 Version Control Version Date Author/Reviewer Version Date Author/Reviewer No No 1 03/02/2003 3.1 20/06/2012 Malcolm Cope 2 27/03/2007 Colleen Horrobin Nerissa Stanley 3 05/02/2009 Shayari Singh Version No.: 3.1 Effective From: 10/08/2012 Page 2 of 5
Introduction WorkCover insurance policies cover Queensland Health (QH) and the Hospital and Health Services (HHS) against the cost of their employees statutory claims and possible common law claims. This insurance coverage ensures that an employee who is injured at work receives financial support following a work related injury. Each year (approximately August/September) an invoice is received from WorkCover to charge QH and the HHSs for the annual workers compensation premium. This annual charge covers the period 1 st July to 30 th June (current year) Summary of Tax Codes and Stamp Duty The Annual Premium Tax Code Subject to GST Subject to Stamp Duty Actual Premium for Current Year P0 Yes Yes Provisional Premium Paid (in previous P0 Yes Yes year) for Current Year Provisional Premium for Next Year P0 Yes Yes Stamp Duty on Premium P5 No Not applicable GST Not required Not applicable Yes Excess Buyout P0 Yes Yes Excess on WorkCover Claim P9 No No WorkCover Revenue to QH from insurer S5 No No Services to Insurer e.g.: Medical records S0 Yes Yes Work Cover Reimbursement to QH for QH staff wages S9 No No Components of the WorkCover Invoice (Initial Renewal Notice) The invoice received from WorkCover Queensland for the workers annual compensation premium is broken down into three components: 1 Annual Premium Calculated by taking the Actual Premium for the current year; subtracting/adding the Provisional Adjustment Premium already paid (in previous year); and then adding the Provisional Premium for the next year. 2 GST The ATO has ruled that GST is payable on all components of the workers compensation premium invoice, except for Instalment Interest and Stamp Duty. 3 Stamp Duty The Office of the State Revenue, Queensland Treasury, has ruled that Stamp Duty is payable on the price of the premium including GST. Stamp Duty is payable on Actual Premium (current year) and the Provision Premium (next year) and plus/minus Adjustment Provisional Premium (paid previous year). Stamp Duty is also payable on the Excess Buyout Amount. (Stamp Duty is Division 81 charge out of scope for GST) Version No.: 3.1 Effective From: 10/08/2012 Page 3 of 5
Processing the WorkCover Invoice The example below shows how the WorkCover invoice is calculated for a Premium: EXAMPLE INVOICE A B (A*10%) C (A+B)*5% The Annual Premium Premium shown on invoice GST @ 10% Stamp Duty @ 5% Premium for Current Year 1,000.00 100.00 55.00 Adjustment of Provisional Premium Paid in Previous -500.00-50.00-27.50 Year Provisional Premium for Next Year 1,200.00 120.00 66.00 Sub-total 1,700.00 170.00 93.50 GST 170.00 Stamp Duty (calc on GST inc Price) 93.50 Total Premium Paid 1,963.50 GST inclusive amount 1,870.00 FAMMIS Tax Coding of the Invoice The total premium is composed of a GST inclusive item (Premium), and a Division 81 item (Stamp Duty), both requiring different tax treatment. The premium should be coded P0, taxable. Stamp Duty should be coded P5 (No GST in the price). Apply the tax codes in FAMMIS as follows: P5 P0 Invoice amount allocated to tax codes $93.50 $1,870.00 If some HHSs allocate the premiums across many cost centres and want to avoid posting two tax code lines (P5 and P0) to each cost centre, you can allocate the total P5 and P0 postings (as above) to a suspense account. You can then post single line entries to each cost centre using tax code P9 for the amounts net of GST and credit the suspense account accordingly (again to P9) shown as follows: GL Code Tax Amount Code ORIGINAL TRANSACTION Premium - Post Key 40 Suspense code P0 *1,870.00 Stamp Duty - Post Key 40 Suspense code P5 93.50 ALLOCATION TO COST CENTRES Post Key 50 GST Exclusive value Suspense code P9 1,793.50 Post Key 40 Cost Centre P9 896.75 Post Key 40 Cost Centre P9 896.75 * Please note: As the amount of $1,870.00 (GST incl.) has been processed using P0 tax code, the balance in the Suspense account from this entry will be the GST exclusive amount of $1,700.00. Therefore, the exclusive value to be moved to the cost centres will be $1,700 (GST excl. premium) + $93.50 (Stamp Duty) = $1,793.50. Version No.: 3.1 Effective From: 10/08/2012 Page 4 of 5
Revenue related to Work Cover 1 1 Work Cover for patients In 2005 QH sourced a Private Ruling from the ATO to confirm the GST ramifications for Workers Compensation patients. The conclusion of the ruling stated that health cover supplied to injured workers is not a taxable supply. The tax code that applicable is S5 (No GST in price). 2 Supply of services such as Medical Records to Work Cover However, services supplied to insurers such as insurer requested medical records, are taxable supplies and GST must be included in the related Invoices. Such supplies to insurer should be coded S0, taxable. 3 Work cover for staff wages When Work Cover provides QH or the HHSs with compensation for wages of staff, GST is not applicable to this revenue. Such receipts will be coded S9, Out of scope of GST For the latest version of this GST Business Procedure, check the GST site on QHEPS: http://qheps.health.qld.gov.au/financenetwork/taxation/web_pages/gst/gst_bus_pro.htm DISCLAIMER: This procedure is written in accordance with A New Tax System (Goods and Services Tax) Act 1999. For further information regarding Queensland Health policies and procedures, the appropriate resources should be researched and/or contacted. 1 Private Ruling 49479 11/02/05 GST & Hospital services and workers compensation Version No.: 3.1 Effective From: 10/08/2012 Page 5 of 5