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Business needs to budget now for GST, says Taxation Institute

Publication date: 17 Feb 99 | Source: THE TAX INSTITUTE

The Taxation Institute of Australia, while supporting the introduction of a GST as part of overall tax reform, has concerns that a number of transitional measures in the Governments A New Tax System (Goods and Services Tax) Bill 1998, will create serious compliance issues for a number of businesses.

In addition, these compliance issues lead to a much broader issue of whether business be allowed sufficient lead time in the transitional period to budget forthe cost of implementing the GST.

"Under the measures detailed by the Government, any business with construction contracts, commercial holdings or unimproved land will be required to value that interest as at 1 July, 2000 so that the GST liability of that asset can be calculated," said Taxation Institute Senior Vice President, Mr Gordon Cooper.

"This will create major compliance issues for business. Apart from the logistics associated with accomplishing this feat, the legislation does not adequately specify what the Commissioner will accept for valuation purposes  so what will business have to do to comply?"

"In addition, there is the issue of the cost of valuing these assets. Forexample, if a building site is under construction on July 1, 2000, every component of the project will need to be valued in order to determine what will be subject to GST and the value of it for GST purposes," he said.

The Taxation Institute of Australia submission to the Inquiries by SenateCommittees into the GST and a New Tax System states that the valuation issue and, more importantly, who will be responsible for funding this exercise underpins a much broader issue of the tax deductibility status of all costswhich a business incurs as a result of the implementation of the GST.

"The cost to business of implementing, administering and maintaining the GST regime will impact dramatically on the efficiency of a business and is likely to be a time consuming and expensive exercise, Mr Cooper said.

"Business will be forced to bear costs such as retraining staff and upgrading computer systems as part of GST implementation. However, these will beborne before GST comes into effect in order to facilitate a business operating under the new tax regime."

"Will business be in a position to afford to implement the GST? And, what if any, tax relief will business receive for incurring these costs?"

"The Taxation Institute strongly believes that all initial GST professional costs must be tax deductible. This must be clearly set out in legislation and be taken into account when considering any start-up compensation packages, especially for small to medium businesses," Mr Cooper said.

Details of these issues and other comments on specific sections of the GST Bill are contained in the Taxation Institute of Australias submission to the Inquiries by Senate Committees into the GST and a New Tax System.