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Empowering Precious Metal Businesses with GST Relief

Approved Refiner & Consolidator Scheme (ARCS)

ARCS offers GST relief, import GST suspension, and improved cash flow for qualifying refiners and consolidators of investment precious metals (IPM).

Purpose

With the Approved Refiner and Consolidator Scheme (ARCS), qualifying refiners and consolidators of investment precious metals (IPM) will be able to pay GST on imports and purchases of raw materials and avoid input taxes on refining activities, thus improving their cash flow and compliance. Under the scheme, ARCS persons are either approved refiners or approved consolidators.

Benefits for Approved Refiners

Import GST suspension

The import GST suspension is valid for approved refiners when they import their own goods to expand their business. They can import goods owned by their overseas non-GST registered principal for supply (in Singapore or overseas) as a section 33(2) agent.

Additionally, approved refiners can enjoy GST suspension on imported goods if they re-export the goods as a section 33A agent belonging to their overseas non-GST registered principal. The overseas principals cannot be GST registered or, if they are, can only be paid as pay-only vendors.

In addition to enjoying GST suspension on imports, approved refiners can also enjoy it when materials (e.g. precious metals) are sent to them by customers who are not GST registered for refining into IPM or precious metals. Overseas customers must not be GST registered or, if they are GST registered, they must be under the OVR regime as pay-only customers.

Last but not least, approved refiners can also enjoy import GST suspension if they re-import goods that they had previously sent abroad to perform value-added activities for their local customers or GST-registered overseas customers (other than people registered under the OVR regime).

Supply Goods to Other ARCS Persons Without Collecting GST

If you supply goods to another ARCS person in the course or furtherance of your business, you are not required to collect and account for GST.

However, this does not include the supply of refining activities. You must account for 7% GST when you supply refining activities relating to locally delivered goods.

It is possible to zero-rate the refining activities for export goods as long as the appropriate export documentation is maintained.

Claim More Input Tax

The input tax you incur in the course of your business can be claimed, except for expenses specifically disallowed by Regulation 26 and 27.

Benefits for Approved Consolidators

The Approved Consolidator consolidates or aggregates materials for supply to specified refiners to refine into IPM and is approved by IRAS.

GST Suspension on Imports

You enjoy import GST suspension on goods (for example, materials or precious metals) which belong to you or are consigned to you by an overseas person who is not registered for GST in Singapore or if he is registered, he is a pay-only person under the Overseas Vendor Registration regime and is required to deliver or supply to a refiner for refining them into investment precious metals or precious metals.

Supply Goods to Other ARCS Persons Without Collecting GST

When you supply goods to an Approver Refiner as part of your business, you are not required to collect or account for GST.

Claim More Input Tax

There is an opportunity to claim more input tax than you would be entitled to under standard GST rules:

    1. If you are not a bankIt is possible to claim full input tax on expenses incurred for the purchase of goods for conversion into IPM and for the sale of newly refined IPM.In the ARCS e-Tax guide, a special apportionment formula is given for residual input tax.
    2. If you are a bankYou can claim full input tax only on precious metal purchases and imports. Other expenses will be subject to your fixed input tax recovery rate.

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