Why SMEs need to know if there will be a GST increase sooner rather than later

Why SMEs need to know if there will be a GST increase sooner rather than later

 

The Turnbull government will have to start ruling in or out certain tax reform measures soon if small businesses are to get the certainty they need, according to one tax expert.

The possibility of an increase to the goods and services tax rate has dominated headlines recently but the federal government has been relatively quiet on this particular issue during the past fortnight.

The government has so far stuck by its line that “everything is on the table” when it comes to tax reform.

 

But SMEs need to be able to plan ahead

 

Craig Whatman, tax partner at Pitcher Partners, told SmartCompany small businesses will likely become frustrated if the government doesn’t soon give clearer indications of what lies ahead when it comes to tax.

“I know that all of our clients would be keen to know sooner rather than later what the government is thinking as part of its broader tax reform package,” Whatman says.

“GST could be a very important part of that, but there is also a broader framework people are hoping to see in terms of potential impacts on corporate tax, on personal income tax, on superannuation.

“People would like to know sooner rather than later so they can start planning.”

Whatman says small businesses will need “sufficient time” to prepare for a new GST rate if the government does decide to push through with reform and take this measure to the next election.

“My view would be you would ideally need 12 months’ notice to do all the things an SME needs to do to prepare for an increase in the GST rate, if it’s going to happen,” Whatman says.

“There’s a number of things an SME would need to do in the lead-up to an increased GST rate.

“The main one is around accounting systems. There are a huge number of accounting packages SMEs use, so they would need to ensure their packages are capable of dealing with a change in the GST rate and the transmission period where you’re going to have to deal with things being under the old rate and the new rate for a period of time.”

A GST increase would mean businesses would have to review all ongoing contracts to make sure they have the ability to pass on the cost of a GST to their customers, according to Whatman.

He also points out retailers often experience a higher period of activity in the lead-up to an increased consumption tax and retailers will need to be given a suitable period of time to prepare for that.

 

So when can we expect the government to reveal its hand?

 

Whatman says in his view, SMEs would need a minimum of six months notice in order to prepare for a change to the GST.

However, he says 12 months would be much more satisfactory.

The government is due to release its tax green paper next year, which should contain further insights into whether GST reform is needed and what a new GST could look like.

The government has said it would take any potential GST increase to an election, with the next federal election due towards the end of 2016.

Whatman says it would be logical to introduce a GST at the start of a new financial year, meaning the earliest Australia is likely to get a higher GST rate is July 2017.

“It would make sense by being at the start of a financial year,” Whatman says.

“But July 2017 is going to be a reasonably tight timeframe for everyone to prepare [after the election]. But if I were a betting man, that’s what I would be betting my money on.”

 

Never miss a story: sign up to SmartCompany’s free daily newsletter.

Trending

COMMENTS

Subscribe
Notify of
guest
0 Comments
Inline Feedbacks
View all comments