GST accounting made overly hard

ACCOUNTING guidelines for the GST system are more complex than they need to be, says The Bookkeeping Network’s Alex Polglaze.

Mr Polglaze said the GST was a transaction-based tax and that would increase business compliance cost.

He said the recommended way of recording transactions for GST purposes would increase transaction costs by 55 per cent.

“Some small businesses could face increased costs of up to $300 a month. They are the ones that are going to get hit,” Mr Polglaze said.

“Some eastern states lobby groups are saying it’s going to cost small businesses $7,000 to implement the GST into their systems.

“Small businesses are going to spend a lot more time doing their books and recording errors could lead to double taxing.”

Mr Polglaze said the Federal Government was recommending people record all transactions GST-inclusive.

However, he said businesses could record its transactions then add the GST component to all of them, reducing transaction costs.

Mr Polglaze said this system would only increase business transaction costs by 7 per cent to 12 per cent.

“The GST should be a breeze. If it is done properly it is an easy system to understand and implement,” he said.

Fallon Group partner Tony Ince said even the GST registration form posed problems.

“There are a couple of questions people should be aware of,” Mr Ince said.

“The first is whether they are opting for cash or accrual accounting. They have to know what that means and how it impacts on their business.

“The second is whether they will be quarterly or monthly remitters. One argument is to hold onto the cash and pay quarterly. The other is to send in the money monthly for ease of administration.”

Mr Ince said GST administration was going to cause problems.

“Most businesses are scared of the bookkeeping side of it and the GST record keeping book is the biggest snowjob of all time,” he said.

Jackson McDonald business advisory services tax consultant Graham Harrison said those businesses that had not prepared for the GST faced serious risks.

“If they haven’t got their terms of trade right it will hurt them,” Mr Harrison said.

“They need to register. They need to get an Australian Business Number. And they need to get used to lodging quarterly or monthly tax returns.”

Mr Harrison said the instructions for lodging GST returns ran to more than 100 pages.

“Once the tax gets going it will be different. A lot of the things causing anxiety now will become routine.”

Mr Harrison said the requirement to lodge a quarterly or monthly Business Activity Statement could actually benefit business.

The statement is essentially a tax return meeting GST and other taxation obligations such as Pay As You Go withholding tax.

“The statement will give the Commissioner of Taxation a real-time snapshot of a business.

“It will also force businesses to have a closer look at how they are travelling. It will show what their sales and purchases are.

“I think it will cause the annual tax return to fade in significance,” he said.

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