Yes, there is a lot of confusion over the GST and how it will affect the reseller, as stated in the June 9 ARN article by Gerard Norsa. I was a reseller in NZ and have moved to Australia, and while I am not exactly sure how closely Australia is going to follow the NZ model, if it does then things are not that bad.
Let's describe the NZ model. The GST is applied to every stage of the products path to the consumer.
If you are a wholesaler and buy product you have to pay GST on that product.
Let's use an example: you paid $100 for a network card. You will have to pay $10 tax (assuming 10 per cent tax). This means you will pay $110. You sell the card to a reseller for $200 + GST which means they pay $220.
You then file a GST return stating you have sold goods worth $220 and you have purchased goods worth $110. Your profit is $110 and of course the tax is going to be 10 per cent.
To calculate the tax on your $110, you divide your profit by 11. So $110 divided by 11 equals $10.
If your tax is 12.5 per cent you divide by 9 etc. I have not complicated the issue by including all sales. You will of course include all sales and all purchases for the month.
That is the official line and way to do it in NZ. There are no businesses that do not pay GST. If you are GST exempt and do not collect GST, you have to file GST returns claiming back the GST paid.
This affects sole traders to corporations. There is a threshold where you have to file returns if you are not GST registered.
There is a simple way of looking at it.
You collect $20 tax, you pay $10 tax. Subtract what you pay from what you collect and you owe $10.
I use this method to calculate how much I have made on the product. I find one tax easier to handle than the multiple taxes that are currently in use in Australia.
If you are a consultant and do not pay GST, if you want to retain your $100 per hour you will then have to charge $110.
Spending extra time in bookwork everyday will only happen at the start because it will be new. Your POS or accounting package will/should handle all the GST calculations for you. Your biggest time will be spent filling out the GST returns.
If you are doing this already for tax purposes it will not really change. It will take longer because it's new, not because it's harder.
I disagree that inventory management will become crucial because of the GST. Inventory management is crucial for your bottom line. You track your GST by purchases and sales for the month. GST has nothing to do with your inventory.
Right now I am buying computer parts at four or five different tax levels. They are automatically calculated on the invoices.
All the companies have to do is make the tax 10 per cent and there will be no exemptions.
This is on the sales side - the purchasing side is different because you have to keep track of your purchases to claim back the GST. This is where you will spend the most money.