Goods and Services Tax, or GST as it is more commonly known, has been implemented in Australia for two decades. GST is a 10% tax applied to most goods and services (as the name suggests) and is a tax that many Australians no longer think about paying. However, if you are a small business owner or director, GST is something that you need to be aware of. Furthermore, recent changes to legislation means that directors may be personally liable for GST payments.
This blog will look at how GST has remained relevant for 20 years, what affect it has for you as a business and what you need to know about these most recent changes.
Why This Tax?
To get an idea of why something is still relevant after over two decades, it’s often best to look at why it was originally implemented. GST began as a recommendation from the then Treasurer, Sir Billy Mackie Sneddon and his Taxation Review Committee which looked at future taxation recommendations in 1972. These committee recommendations became the basis of many of our well-known tax systems including Capital Gains Tax (CGT), Fringe Benefits Tax (FBT) and of course GST.
However, it wasn’t until the Howard Government that GST was first implemented on 1 July 2000 after a two year campaign of testing the waters with an intent to replace the outdated, inefficient and distorted system of state and federal indirect taxes with a new tax system that was fairer, simpler and more rewarding for individuals (Department of the Treasury 1998: 3–16). The GST tax was seen to be broadening the base that was taxed, while lowering the overall rate. Although there were some people that were negatively affected by this tax being introduced, such as low income earners, there was some relief with tax cuts during this time and a slow enforcement by the Australian Taxation Office (ATO) who took an “educate first, enforce later” approach.
What’s Changed Over the Last 20 Years?
For the first 15 years of GST being in existence, not too much changed. In 2016 and 2018 the GST law was significantly changed to align with two key areas:
- Inbound Intangible Consumer Supplies; and
- Offshore supplies of low value goods.
There were also withholding schemes relating to the sales of new residential premises introduced during this time. Over the last few years, some further provisions for eCommerce have been put into place to adapt to the global online marketplace.
However, earlier this month, a Bill was passed in Senate meaning that Directors will now be personally liable for unpaid GST. At present, Directors can be liable for unpaid superannuation and withholding tax. However, with the proposed legislative change, unpaid GST, luxury car tax and wine equalisation tax liabilities could also become a personal liability. Alongside this change, the ATO will have the power to retain refunds where a taxpayer has failed to lodge a return or provide other information that may impact the refund, such as any outstanding GST compliance lodgements, such as Business Activity Statements (BAS). This Bill will be in place from the first day of the quarter following the Royal Assent of the Bill. This means that Directors could be liable as early as 1 April 2020.
When Do I Need to Apply for GST?
As a business, registering for GST is a must if you have:
- An annual turnover of $75,000 or more
- Have a not-for-profit organisation with an annual turnover of $150,000 or more
- Are a taxi or ride-sourcing driver.
If you are not registered for GST with your business, it’s important to check if you are going to meet the turnover threshold amount of the year. If you are going to meet the threshold amount, you will need to register for GST within 21 days to remain compliant.
Need help with registering for GST? Contact our Team today.
How Do I Stay Compliant Now That I’m GST Registered?
Being registered for GST also means that you will be required to complete a Business Activity Statement (BAS) each quarter to report on and make payment for the GST amounts on purchases. You will also need to provide customers or clients with a tax invoice for sales.
Furthermore, with the Bill mentioned before that is due to be implemented soon, it is paramount that compliance and risk management solutions be reviewed and tightened if needed to avoid any penalties that may apply to Directors. This is also a great way to avoid any potential future issues and ensure that your compliance is up-to-date and correct.
Need help with your GST compliance? Contact our Team today.
GST is a tax that has very recently undergone some large changes but has remained relevant for over two decades. As a business owner, it’s important to be aware of the GST registration thresholds and what being registered for this tax means from a compliance perspective especially if you are a Director. If you’d like any further information about GST or how Walker Hill can help you make it count within your business, contact us today on 07 3367 3155 or email support@walkerhill.com.au
