Small business anxiety over the GST has hit new heights, analysis by CPA Australia has revealed.
Small business anxiety over the GST has hit new heights, analysis by CPA Australia has revealed.
The analysis is based on calls during March to the federally-funded GST Assist helpline small business service.
“Clearly there is still a long way to go and we expect that anxiety will only increase from here on in,” CPA Australia executive director David Edwards said.
“Small business appears to be in the thick of GST planning. With just under three months left, many are now only just coming to terms with the breadth of issues arising from the tax change.”
The number of calls from small business increased dramatically as the advertising campaign for the 13 3088 number hit home.
In some weeks during March, the number of calls to the small business service was more than 500 per cent above the previous month.
The analysis revealed that, in addition to continuing questions on business registrations and the $200 certificates, pricing and the impact of PAYG were the major issues concerning small business.
“PAYG and the 48.5 per cent withholding tax on payments to unregistered businesses were of particular concern to many,” Mr Edwards said.
“Many businesses have realised that withholding tax arrangements may cause conflict after 1 July, so wisely are heading this problem off at the pass.
“Pricing is also a sensitive area as businesses contact suppliers to work out post 1 July 2000 prices.
“From now on, the small business sector is likely to be running at full speed in an effort to get on top of the GST,” he said.
Following is a sample of questions from the GST Assist helpline which may help other small businesses.
• I am a small retailer. Do the simplified accounting methods affect me?
Simplified accounting methods apply to retailers with a turnover of less than $1 million ($2 million for the 2000-01 financial year only).
They are designed to assist retailers who sell a mix of taxable and GST-free merchandise.
The accounting methods allow businesses to estimate total GST-free sales over each tax period rather than having to separately identify GST-free and taxable sales.
There are three methods which can be used.
The business norms method uses standard percentages and applies them to sales and purchases to estimate GST-free sales.
The snapshot method looks at purchases and sales for a set period of time. The final alternative is the stock purchase method, where a snapshot of purchases is taken to estimate the percentage of GST-free purchases and sales.
• I currently use accrual accounting in my business. Can I elect to change to cash accounting for GST purposes?
If you have not yet registered for an ABN/GST, you can elect to use cash accounting if your business has a turnover of less than $1 million.
The legislation then applies what is called the twelve month rule. This means that you cannot change the method by which you account for GST for at least twelve months.
If you have already registered and elected to use accrual accounting you cannot change your accounting method for twelve months.
• I import a lot of the products I need to run my business. How does the GST impact on imports?
Imported goods are subject to GST in the same way as domestic sales. The key difference is that, for imported goods, it is the importer, not the supplier, who is liable to pay the GST.
Under the general rules, importers will pay GST to the Australian Customs Service at the time when they clear the goods through customs. If the importer is registered, they will generally be entitled to claim an input tax credit in their next GST return.
However, a special scheme has been introduced that will allow most importers to defer paying GST on imported goods until they lodge their next business activity statement.
This allows importers to claim their input tax credit on the importation at the same time as they account for their GST liability. The end result is that importers will never have to physically pay GST on the importation.
More information is available from the ATO tax reform website at www.taxreform.ato.gov
The analysis is based on calls during March to the federally-funded GST Assist helpline small business service.
“Clearly there is still a long way to go and we expect that anxiety will only increase from here on in,” CPA Australia executive director David Edwards said.
“Small business appears to be in the thick of GST planning. With just under three months left, many are now only just coming to terms with the breadth of issues arising from the tax change.”
The number of calls from small business increased dramatically as the advertising campaign for the 13 3088 number hit home.
In some weeks during March, the number of calls to the small business service was more than 500 per cent above the previous month.
The analysis revealed that, in addition to continuing questions on business registrations and the $200 certificates, pricing and the impact of PAYG were the major issues concerning small business.
“PAYG and the 48.5 per cent withholding tax on payments to unregistered businesses were of particular concern to many,” Mr Edwards said.
“Many businesses have realised that withholding tax arrangements may cause conflict after 1 July, so wisely are heading this problem off at the pass.
“Pricing is also a sensitive area as businesses contact suppliers to work out post 1 July 2000 prices.
“From now on, the small business sector is likely to be running at full speed in an effort to get on top of the GST,” he said.
Following is a sample of questions from the GST Assist helpline which may help other small businesses.
• I am a small retailer. Do the simplified accounting methods affect me?
Simplified accounting methods apply to retailers with a turnover of less than $1 million ($2 million for the 2000-01 financial year only).
They are designed to assist retailers who sell a mix of taxable and GST-free merchandise.
The accounting methods allow businesses to estimate total GST-free sales over each tax period rather than having to separately identify GST-free and taxable sales.
There are three methods which can be used.
The business norms method uses standard percentages and applies them to sales and purchases to estimate GST-free sales.
The snapshot method looks at purchases and sales for a set period of time. The final alternative is the stock purchase method, where a snapshot of purchases is taken to estimate the percentage of GST-free purchases and sales.
• I currently use accrual accounting in my business. Can I elect to change to cash accounting for GST purposes?
If you have not yet registered for an ABN/GST, you can elect to use cash accounting if your business has a turnover of less than $1 million.
The legislation then applies what is called the twelve month rule. This means that you cannot change the method by which you account for GST for at least twelve months.
If you have already registered and elected to use accrual accounting you cannot change your accounting method for twelve months.
• I import a lot of the products I need to run my business. How does the GST impact on imports?
Imported goods are subject to GST in the same way as domestic sales. The key difference is that, for imported goods, it is the importer, not the supplier, who is liable to pay the GST.
Under the general rules, importers will pay GST to the Australian Customs Service at the time when they clear the goods through customs. If the importer is registered, they will generally be entitled to claim an input tax credit in their next GST return.
However, a special scheme has been introduced that will allow most importers to defer paying GST on imported goods until they lodge their next business activity statement.
This allows importers to claim their input tax credit on the importation at the same time as they account for their GST liability. The end result is that importers will never have to physically pay GST on the importation.
More information is available from the ATO tax reform website at www.taxreform.ato.gov
