Major GST hurdle still to come

NOW that businesses have survived the earliest weeks of the GST implementation and the pricing issue has subsided, it is important to conduct a quick review, says CPA Australia tax consultant David Boydell.

Mr Boydell said that, for most businesses, the next major hurdle wasn’t for another three months, when they will need to prepare their first Business Activity Statement.

However, this gives some ‘quiet time’ which they should use to conduct a review to evaluate how well they prepared for the GST.

“This review is essential because it will allow businesses to detect any problems early and nip them in the bud,” he said.

“Businesses that are unable to complete their BAS correctly will be exposing themselves to significant penalties from the Australian Taxation Office.”

Mr Boydell said that businesses needed to check their accounting systems to ensure they were capturing GST information correctly, from a purchasing and sales perspective.

Checking accounting systems involved ensuring transactions were correctly coded as taxable, GST-free or input taxed, that the system was correctly attributing on either a cash or accruals basis and that input tax credits were claimed for transactions where a valid tax invoice was held.

“The new system certainly requires more accurate record

keeping but the more information you have about your business the better chance you have of understanding it, and the more successful you are likely to be in the

long-term,” Mr Boydell said.

While most businesses have now settled their prices, Mr Boydell emphasised that re-pricing needed to be ongoing.

He said businesses needed to tie up loose ends and unresolved issues – such as how GST applies to the firm’s social club – and should check cash flows were being managed effectively.

It is also important that businesses meet withholding tax obligations. If suppliers do not quote an ABN, businesses must generally withhold tax at the top rate of 48.5 per cent unless the supplier has either an ABN ‘safety net’ letter from the ATO or a ‘statement by a supplier’ form exempting them from the need to have an ABN.

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