GST for the benefits provided to employees
Generally, you are required to account for output tax on the goods given to your employees or for temporary use by employees except when it relates to:
- Free food or beverage catered for employees or the provision of free accommodation in a hotel, inn, boarding house or similar establishment;
- Gifts with value of not more than $200 each (excluding GST); or
- Goods for which no credit for input tax has been allowed on its purchase. That is, if the taxable person chooses not to claim input tax credit for the GST incurred on the goods, he needs not account for output tax when he subsequently gives away those goods for free or lets his employees use them temporarily.
-- IRAS e-tax guide
Assuming you bought an iPad, which cost S$688 (inclusive of S$45.01 GST) and you claimed the input tax of S$45.01. Subsequently, you gave the iPad to your employee as a reward for his long service to the company.
Under the gift rule, you are required to account for the output tax on the iPad since the cost of the iPad, exclusive of GST, is more than S$200.00 . Besides, you have claimed the input tax of S$45.01, you are accountable for the output tax of the iPad although you have given the iPad to your employee as a reward (Free).
You can use either the Sales Invoice or the Receipt to record the transaction into MoneyWorks accounting software (Note: Journal transaction does not allow you to record with a GST code, hence you should not consider using it to record transaction which involving GST code).
In the Receipt transaction, you may use the Fringe Benefits account with the relevant GST code (DS GST code in this case). This will allow the GST report to capture the Output Tax correctly. Then, on the second line of the Receipt transaction, you less off the full amount, $688, from the Fringe Benefit account.
Account Net GST Gross
Fringe Benefit account 642.99 45.01 688.00
Fringe Benefit account 0.00 0.00 -688.00
The double entry for this transaction will be:
Debit Fringe Benefit: 688.00 (it shows as negative Credit)
Credit Fringe Benefit: 642.99
Credit GST Received (Output): 45.01
This will give a net debit balance of 45.01 in the Fringe Benefit account.
If you have recorded the purchase of the iPad earlier as:
Debit Purchase: 642.99
Debit GST Paid (Input): 45.01
Credit Bank: 688
Then, you need to pass a journal:
Debit Fringe Benefit: 642.99
Credit Purchase: 642.99
This is a reclassification journal to adjust both the purchase account and Fringe Benefit account.
To simplify the process, if you have decided to give the iPad as a gift to the employee at the point of purchase, then you may consider charging it directly to the Fringe Benefit account and without claiming the Input GST. You are not accountable for the Output GST if you did not claim the Input GST in the first place (Goods for which no credit for input tax has been allowed on its purchase).
You should consult your accountant on the GST entry to avoid any errors in computing GST.
*DS GST code is Deemed Supply (Output Tax).