GST still lurks as property industry problem
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Tuesday, 11 January, 2000 - 21:00
DURING September and October the Property Council of Australia surveyed its membership in relation to the preparedness of business for GST.
The survey was conducted in order to identify particular areas of concern as well as to provide some benchmarks for organisations in tracking their GST progress.
With less than ten months to go the GST start date, 25 per cent of respondents did not think they were prepared for the GST.
Although this percentage dropped to 12.5 per cent when asked how prepared the organisation would be by 1 July, it indicated there is still a significant amount of work to be done by a number of organisations in getting ready for the GST.
This is of particular concern given that only 2 per cent of respondents had specifically appointed someone to oversee the GST implementation.
All other respondents had simply added responsibility for the GST to the role of the financial controller or similar role within the organisation.
Of further concern is that, of those organisations intending to establish a GST taskforce, 30 per cent had not yet done so.
A further 16 per cent said they would not be establishing a GST taskforce, placing an additional burden on the person nominated as responsible for its implementation.
Consistent with the general message being delivered in relation to implementation, no respondent had appointed specific general taxation personnel to the role of coordinating GST implementation.
That is, the issue of GST implementation is being seen as a general business issue rather than just a tax technical issue.
Where a GST taskforce had been established, it comprised members from a broad range of areas with a significant representation of external consultants.
Only 16 per cent of respondents had operations in a country where GST or VAT currently operated.
However, those organisations had made enquiries of their overseas operations in relation to GST. Half had actually visited those countries.
Interestingly, 16 per cent of respondents had not sought advice from external consultants on GST issues and 6 per cent indicated they did not anticipate doing so.
Responses indicated the issue of GST in contracts had generally been addressed.
More than 80 per cent had reviewed standard contracts and contracts spanning the start date.
A similar number had developed a standardised approach to addressing GST in new contracts and established a process for review of contracts for GST.
It appears that, while the issue of passing on GST is addressed, other issues such as the requirement for tax invoices or adjustment notes and adjustments to price arising from overall indirect tax reform are addressed less than half the time.
While some issues are not critical, it is suggested that addressing these issues in the contract in a comprehensive fashion is beneficial and will avoid dispute later on.
All but one respondent indicated they would be using a computerised system for GST compliance.
Around 62 per cent indicated they had already briefed relevant personnel in relation to system requirements on the transition to a GST and ongoing compliance.
However, 16 per cent had not yet identified whether existing systems would be able to address GST.
About one-third to one-half of respondents had not considered the impact of GST on the production of financial reports and other tax calculations and return preparation.
A significant proportion of respondents had not yet considered the impact of GST on important issues such as cash flow, balance sheets, profit and loss statements, borrowing ratios and returns on assets, remuneration packaging and employment contracts, capital expenditure plans and the inclusion of GST transition costs in budgets.
More than half the respondents had not yet developed a plan for dealing with customers or suppliers in relation to GST, and a similar number had not yet trained sales and purchasing staff on GST issues.
Also, notwithstanding potential cash flow effects arising from GST, almost two-thirds said they had not considered altering payment terms offered to customers or requested any change to payment terms offered by suppliers.
More than 40 per cent indicated they had not yet determined the GST classification of supplies.
There also seems to be uncertainty surrounding the application of the transitional provisions relating to the property sector.
More than 75 per cent indicated they didn’t know whether they would adopt the margin scheme or did not respond to the question.
A similar number also either answered they had not considered how the transitional valuations of construction work will be made or did not respond to the question.
About 75 per cent of respondents said they would be making their current form of invoices comply with the requirements for tax invoices rather than issue a separate document.
More than one-third of respondents had not yet considered the impact on prices of the introduction of the GST.
Two-thirds had not developed any strategy for documenting pricing decisions with less than 30 per cent indicating they had considered pricing policies in light of the Australian Competition and Consumer Commission guidelines for price exploitation.
The survey was conducted in order to identify particular areas of concern as well as to provide some benchmarks for organisations in tracking their GST progress.
With less than ten months to go the GST start date, 25 per cent of respondents did not think they were prepared for the GST.
Although this percentage dropped to 12.5 per cent when asked how prepared the organisation would be by 1 July, it indicated there is still a significant amount of work to be done by a number of organisations in getting ready for the GST.
This is of particular concern given that only 2 per cent of respondents had specifically appointed someone to oversee the GST implementation.
All other respondents had simply added responsibility for the GST to the role of the financial controller or similar role within the organisation.
Of further concern is that, of those organisations intending to establish a GST taskforce, 30 per cent had not yet done so.
A further 16 per cent said they would not be establishing a GST taskforce, placing an additional burden on the person nominated as responsible for its implementation.
Consistent with the general message being delivered in relation to implementation, no respondent had appointed specific general taxation personnel to the role of coordinating GST implementation.
That is, the issue of GST implementation is being seen as a general business issue rather than just a tax technical issue.
Where a GST taskforce had been established, it comprised members from a broad range of areas with a significant representation of external consultants.
Only 16 per cent of respondents had operations in a country where GST or VAT currently operated.
However, those organisations had made enquiries of their overseas operations in relation to GST. Half had actually visited those countries.
Interestingly, 16 per cent of respondents had not sought advice from external consultants on GST issues and 6 per cent indicated they did not anticipate doing so.
Responses indicated the issue of GST in contracts had generally been addressed.
More than 80 per cent had reviewed standard contracts and contracts spanning the start date.
A similar number had developed a standardised approach to addressing GST in new contracts and established a process for review of contracts for GST.
It appears that, while the issue of passing on GST is addressed, other issues such as the requirement for tax invoices or adjustment notes and adjustments to price arising from overall indirect tax reform are addressed less than half the time.
While some issues are not critical, it is suggested that addressing these issues in the contract in a comprehensive fashion is beneficial and will avoid dispute later on.
All but one respondent indicated they would be using a computerised system for GST compliance.
Around 62 per cent indicated they had already briefed relevant personnel in relation to system requirements on the transition to a GST and ongoing compliance.
However, 16 per cent had not yet identified whether existing systems would be able to address GST.
About one-third to one-half of respondents had not considered the impact of GST on the production of financial reports and other tax calculations and return preparation.
A significant proportion of respondents had not yet considered the impact of GST on important issues such as cash flow, balance sheets, profit and loss statements, borrowing ratios and returns on assets, remuneration packaging and employment contracts, capital expenditure plans and the inclusion of GST transition costs in budgets.
More than half the respondents had not yet developed a plan for dealing with customers or suppliers in relation to GST, and a similar number had not yet trained sales and purchasing staff on GST issues.
Also, notwithstanding potential cash flow effects arising from GST, almost two-thirds said they had not considered altering payment terms offered to customers or requested any change to payment terms offered by suppliers.
More than 40 per cent indicated they had not yet determined the GST classification of supplies.
There also seems to be uncertainty surrounding the application of the transitional provisions relating to the property sector.
More than 75 per cent indicated they didn’t know whether they would adopt the margin scheme or did not respond to the question.
A similar number also either answered they had not considered how the transitional valuations of construction work will be made or did not respond to the question.
About 75 per cent of respondents said they would be making their current form of invoices comply with the requirements for tax invoices rather than issue a separate document.
More than one-third of respondents had not yet considered the impact on prices of the introduction of the GST.
Two-thirds had not developed any strategy for documenting pricing decisions with less than 30 per cent indicating they had considered pricing policies in light of the Australian Competition and Consumer Commission guidelines for price exploitation.