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Simplified GST for Global Businesses

Approved Contract Manufacturer & Trader (ACMT) Scheme

BluTrust assists with application and compliance of ACMT Scheme that simplifies taxation for businesses with overseas connections, providing GST relief on value-added activities and import GST suspension.

What is the Approved Contract Manufacturer and Trader (ACMT) Scheme about?

The approved contract manufacturer and trader scheme is a simplified taxation system that provides relief from GST on the value-added activities of businesses with substantial overseas connections. The ACMT Scheme removes the need for these businesses to account for GST on imported goods that are subject to value added activity.

Eligibility

The scheme can be applied by contract manufacturers working in the semi-conductor, printing and biomedicine industries—Active Pharmaceutical Ingredients (APIs) manufacturing.

The ACMT will consider contract manufacturers in other business segments of the biomedical industry for inclusion on a case-by-case basis.

Benefits of ACMT Scheme

  •  Disregarding the supply of value-added activities

As long as the goods you have treated or processed are exported, delivered to another ACMT person or delivered to the final customer of your overseas client, you may disregard the supply of value added activities (e.g. processing, assembly and testing services).

When the goods you have treated/processed are exported or delivered locally to a waste management vendor for disposal or destruction without compensation, you can disregard the supply of value added service relating to failed or excess productions to your overseas client.

Self-Disposal

In the event that you self-destroy or self-dispose of failed or excess productions, please seek the Comptroller’s approval to disregard the value added service.

The destruction/disposal process and supporting documentation should be detailed.

Fees charged to overseas clients are not subject to GST.

  • Enjoying import GST suspension

The following scenarios qualify for GST suspension:

  1. Importing your own goods for business purposes;
  2. Importing goods belonging to your overseas principal and supplying them in Singapore or exporting them, as a section 33(2) agent. An overseas principal must be GST-unregistered or, if GST-registered, must be registered as a pay-only person under OVR;
  3. Importing goods for your overseas principal that will be reexported as a section 33A agent. Overseas principals must not be GST-registered or, if GST-registered, they must be registered under OVR as pay-only persons;
  4. Goods consigned to you by an overseas client and on which value-added activities are performed under ACMT; and
  5. If the requirements explained under section 33B are satisfied, you can reimport goods you previously exported abroad for value-added activities belonging to your local customer or GST-registered overseas customer (excluding a person registered as a pay-only person under the OVR regime).

  • Claiming GST on local purchases

On behalf of the overseas client, you may claim GST incurred on goods (for example, raw materials) locally purchased by your overseas client and delivered to you.

The goods should be inputs into your treated or processed goods, which are then exported or delivered to other ACMT people or customers overseas.

This input tax claim can only be made if you either paid the GST on the goods yourself or refunded it to your overseas client.

Capital Allowances

Deductions for the decline in value of depreciating assets are available under the Uniform capital allowance (UCA) system. In addition to the rules for depreciating assets, deductions are allowed for certain other capital expenditure.

Small business entities have the option of choosing simplified depreciation rules. Under these rules, small business entities can claim an immediate deduction if the cost is below the relevant threshold or else add the asset to the small business depreciation pool.

Land, trading stock and most intangible assets (excluding exceptions such as intellectual property and in-house software) are not depreciating assets.

The decline in value is generally calculated by spreading the cost of the asset over its effective life, using one of two methods:

Prime cost method – decline in value each year is calculated as a percentage of the initial cost of the asset
Diminishing value method – decline in value each year is calculated as a percentage of the opening depreciated value of the asset
MORE: Australian Taxation Office (ATO) Decline in value calculator.

For most depreciating assets, taxpayers can either self-assess the effective life, or use estimates published by the ATO. Taxpayers can recalculate, either up or down, the effective life of an asset if the circumstances of use change and the effective life initially chosen is no longer accurate. An improvement to an asset that increases its cost by 10% or more in a year may result in an obligation to recalculate the effective life of the asset.

Decline in value of cars is restricted to the car limit. From 1 July 2022, the luxury car tax threshold for luxury cars is $64,741 (it was $60,733 for the year commencing 1 July 2021). Luxury car leases are treated as a notional sale and purchase, with decline in value restricted to the car limit.

The decline in value of certain depreciating assets with a cost or opening adjustable value of less than $1,000 can be calculated through a low-value pool. The decline in value for depreciating assets in the pool is calculated at an annual diminishing value rate of 37.5%.

Changes for 2022 and 2023

From 12 March 2020 until 31 December 2020, the asset cost threshold for the instant asset write-off (which is usually only available to small business entities) has increased from $30,000 to $150,000 and the eligibility criteria expended to cover entities with an aggregated turnover threshold of less than $500 million (up from $50 million).

Further, from 12 March 2020 until 30 June 2021 the Backing business investment measure applied to businesses with aggregated turnover below $500 million and provides either:

A deduction of 50% of the cost or opening adjustable value of an eligible asset on installation (existing depreciation rules apply to the balance of the asset's cost), or
For businesses using a small business depreciation pool, a deduction of 57.5% of the cost of the asset in the first year, with the balance added the asset to the small business pool
In addition, from 6 October 2020 to 30 June 2023, full expensing applies to allow eligible businesses with an aggregated turnover of less than $5 billion to deduct the full cost of new eligible depreciating assets. For businesses with aggregated turnover of less than $50 million, full expensing also applies to eligible second-hand assets.

Activity Statement

Businesses use activity statements to report and pay a number of tax obligations, including GST, pay as you go (PAYG) instalments, PAYG withholding and fringe benefits tax. Non-business taxpayers who need to pay quarterly PAYG instalments also use activity statements.

Activity statements are personalised to each taxpayer to support reporting against identified obligations.

Activity statements for businesses may be due either quarterly or monthly. Generally, businesses can lodge and pay quarterly if annual turnover is less than $20 million, and total annual PAYG withholding is $25,000 or less. Businesses that exceed one or both of those thresholds will have at least some monthly obligations. Non-business taxpayers are generally required to lodge and pay quarterly.

Taxpayers with small obligations may be able to lodge and pay annually. Some taxpayers may receive an instalment notice for GST and/or PAYG instalments, instead of an activity statement.

The Australian Taxation Office (ATO) web site provides instructions on lodging and paying activity statements. Detailed instructions are provided for each of the different tax obligations:

GST (Goods and Services Tax)
PAYG (Pay As You Go) Instalments
PAYG (Pay As You Go) Withholding
FBT (Fringe Benefit Tax)
LCT (Luxury Car Tax)
WET (Wine Equalisation Tax)
Fuel Tax Credits