GST questions answered

Q. I operate a small business that sells mainly to business customers. I have decided to keep my prices the same because some customers have threatened to go elsewhere if I raise my prices. Am I doing the right thing?

A. You deal mainly with business customers. Assuming they are registered for GST, they will generally be entitled to claim input tax credits to recover any GST included in your prices.

This means they should not be adversely affected if you raise your prices to factor in the GST and other tax changes.

If your customers are threatening to go elsewhere if you raise your prices, it is important that you talk with them and make sure they understand that adding GST to your prices will not change the real cost to them.

Of course, if you do raise your prices, you will need to make sure that you don’t simply raise prices by 10 per cent, but that you take into account any cost savings that may accrue to you as a result of the new tax system.

Q. I account for GST on a monthly basis. I have heard rumours that the Australian Taxation Office has extended the due date for my first few business activity statements. Is this true?

A. The ATO recently extended the due date for the first two Business Activity Statements for some, but not all, monthly remitters.

In order to qualify for the extension, you must have an annual turnover of less than $20 million and must have elected to report your GST obligations on a monthly, rather than a quarterly basis.

For those businesses that qualify for the extension, the due date for their first BAS will be extended by two weeks to September 4.

The due date for the second BAS will be extended by one week to September 28.

Q. I am a builder. Recently a company contracted me to perform work based on a fixed price quote of $100,000. The job ran beyond July 1, meaning I incurred a GST liability. My customer has refused to compensate me for the GST, but now is demanding a tax invoice so they can claim an input tax credit. Since they have refused to compensate me for the GST, I intend to show the GST as $0 on the invoice, thereby preventing them from claiming an input tax credit. Can I do this?

A. You are in an unfortunate position. Your construction work ran beyond July 1, exposing yourself to a GST

liability.

While you may be unhappy with your customer for refusing to compensate you for the GST, you cannot show nil GST on the invoice.

The legislation is very clear on this issue. Under the legislation, the total amount paid by someone for goods or services will always be inclusive of any GST that applies to the supply.

This is the case regardless of whether or not you took GST into account when setting your prices.

n These questions were taken from the GST Assist small business helpline: 13 30 88.