The GST . . . nemesis or muse?

The GST . . . nemesis or muse?

The much discussed Goods and Services Tax could be just around the corner. Tamara Plakalo investigates the implications for the accounting software reseller.

As it now stands, only a show of Democrat will and Senator Brian Harradine separate you - the reseller, from the next big thing in the Australian IT market. Naturally, there is a catch in the promising echo of the expression "the next big thing", for this time around this serves as an alias for a more sinister sounding syntagma known as the Goods and Services Tax or the GST.

Admittedly, the dichotomy of feelings that start to emerge following the realisation that your nemesis in the consumer world should also be your muse in the world of business does not make for a particularly comfortable experience.

But the point is that business matters are not supposed to make you feel warm and fuzzy - only financially better off, if you're lucky. And according to industry analysts, you are. Furthermore, you are likely to remain so for as long as it takes the Government to introduce the supposedly simplified new tax system to the apprehensive business populace. So, what's the catch? Well, the "luck" part only applies if you are an accounting software reseller.

You see, as a consumer, you will ultimately bear the finan- cial burden of the GST. As a businessperson, you might face administrative confusion and frustration, especially in the period of transition from the Wholesale Sales Tax (WST) into the Goods and Services Tax era. But as an accounting software reseller, jubilation may be imminent, because everyone is saying you're about to hit a jackpot that has a potential to be larger than even the famously lucrative Y2K compliance market. Just think "GST on value add", "levies on outputs" and "claims on inputs" and you should immediately understand what could be driving your business after June 30, 1999 - provided that A New Tax System (Goods and Services Tax) Bill 1998 somehow manages to bypass senator Harradine's scrutiny before the GST legislation deadline.

"The issue here is that financial systems influence business processes significantly and software providers have always been expected to provide information and advice on any possible changes that could impact those processes," explains Ron Read, Systems Union's northern region sales manager for Australia.

"Much of those consulting skills have already been transferred to the channel, but when it comes to the GST, resellers of software in Australia might not have the necessary experience to provide the satisfactory advice," which means that you should start learning now.

Beat the BOPS at their game. Although Senator Harradine's position remains covered in the veil of devilishly Tasmanian secrecy, the assumption that the GST will be introduced on the 1st of July 2000 is the only variable the usefulness of which no one seems to be questioning. Obviously, the proposition that there is big money to be made in the GST-driven accounting software market is too tempting to even consider the possibility that the bill might not be passed and there are several ways to explain this attitude.

Put political creeds and convictions aside and it becomes obvious, for example, that the GST-driven market would be large enough to ensure another period of certainty for technology providers and resellers. To start with, the demand for reseller services would more than likely outstrip the supply for a considerable period of time and that is a reason good enough to think of the GST as an inevitability, rather than merely a possibility.

Systems Union's Read, who is not doubting the GST's imminent arrival, thus makes a point of saying that resellers can easily beat the likes of Baan, Oracle, People Soft and SAP (the BOPS) at the GST game simply because they have historically been better equipped to deal directly with their customers.

"The opportunities are enormous, when you think about the depth of changes businesses will experience when the GST is introduced," he says, pointing out that the two major concerns that resellers will need to address in dealing with businesses will be preparation of software for the GST and advising and supporting their customers in achieving wider (business process-based) compliance.

Considering that, under the Government proposal, the GST is only 15 months away and the implementation of changes will have to be done in a very definite timeframe, it is important to start thinking about those changes now.

"From the channel's perspective, the greatest opportunity lies in understanding what the GST is all about and providing service in form of advice on the implications that the changes will have on the accounting system and therefore their accounting software," Bruce Nixon, managing director of Sydney-based software consulting company Merant, advises.

Only 12 months

Warning that businesses don't appreciate the fact that they will have "only 12 months to analyse, redevelop and test their applications", Nixon reveals that he believes the GST buck is shinier at the high end, where many companies "still have one-off applications written in COBOL".

"Certainly, I think there will be a number of organisations that will have to replace their existing systems with GST-compliant software," Nixon said.

However, resellers at the top end will face tough competition from vendors themselves who, owing to their presence in international markets, will have a competitive advantage in selling their expertise, as well as software. In addition, they will, as is always the case, have more marketing clout than a smaller local vendor, let alone a reseller.

And then there is the genuine issue of GST readiness that, according to Platinum Software's managing director, David van Toor, you, the reseller, should carefully address.

"Australia is in a far better position than New Zealand was 10 years ago when the GST was introduced there, because a majority of applications that you get in Australia are compliant and will only need fine tuning when the details are made available. However, we're talking about a majority, but not about all accounting software applications," van Toor asserts.

Cautioning companies against using and reselling applications from local vendors without significant overseas involvement and experiences with value-added taxes, van Toor says "it is important to investigate what a vendor means by 'GST-compliant'.

"You have to remember that New Zealand, for example, went through three to four months of chaotic GST introductory experience, because companies were using products not tested in the economies operating with value-added taxes.

"What happened was that once these applications went live, a lot of issues came to light that vendors had not thought of because they did not have a direct experience with a value-added tax," which brings us back to the point that understanding the GST will be the reseller's wild-card in this particular accounting software game.

Issues. Despite the fact that all the specifics of the legislation are not yet known, enough information is available to resellers to understand how the GST will impact business, and more specifically, accounting practices.

Three issues should be carefully investigated. According to Melbourne-based Business Manage Software's managing director George Adamowicz, the hardest part to deal with will be the transition from the Wholesale Sales Tax (WST) to the GST.

"People will have to claim back the WST they paid on stock on hand that will be sold under the new tax regime. Now, while there is a legislative mechanism available to deal with that issue, people forget that their accounting software will also have to be able to handle it in an appropriate way."

"Hence, it is the transition itself that will definitely be the most complex area businesses will have to deal with, both in procedural and technological terms," says Adamowicz.

With a number of yet unknown issues that resellers and businesses will have to face, it is worth remembering that the GST will impact each and every transaction, whether a company is buying or selling goods or services.

Managing purchases and sales, and the process of the GST reporting to the Australian Taxation Office on both inputs and outputs are the other two areas resellers should get well versed on.

"Reporting is going to be one of the biggest procedural issues we will face after the introduction," offers QSP's product marketing manager Neil Cook.

"Every item you purchase will have to have the GST added to it and that will have to be recorded separately from price, as it will be posted to a separate balance sheet.

"Everything you sell will also have to have a GST component calculated into it, so, at the end of a month or a quarter you will have to report on both and pay a certain amount of tax on your transactions," Cook explains, indicating customers will therefore need greater support in order to be able to cope with the introduction.

Yet none of these issues will create great problems when it comes to preparing software to deal with them. The challenge is to prepare users for the whole process.

"Coming to grips with business procedures involved in the introduction of the GST will be the biggest issue for companies, and especially for small businesses," David Ridley, managing director of SBT software-reseller Sarcom, adds.

"So, if you want to make money, you should get educated and get ready to educate - that's where your biggest GST opportunity is."

The bottom line, however, is that you will need to be able to convince your customers that their sales and reconciliation systems can handle the GST before you can start offering advice on business procedures related to the new tax.

So, if you still haven't checked the GST compatibility of products you are reselling, remember that the Lower House has already passed the Bill. And if you haven't checked the GST facts, remember your accountant is your biggest competition.

Key areas of impact on accounting softwareInventory (especially calculating credit for WST-paid stock on hand)Purchasing and Sales (purchase and sales orders to account for the GST rate)Invoicing (GST will have to be shown separate from the price of an item)General Ledger and Balance SheetsThe GST GlossaryWhat is the GST?

The Goods and Services Tax is a broad-based indirect tax on private consumption that should replace the Wholesale Sales Tax (WST) and a number of State indirect taxes.

Registering for GST

Every company with an annual turnover exceeding $50,000 will be required to register for GST. If you don't register, you will not be allowed to charge GST on your sales, nor to claim input tax credits. Provided the bill passes the Senate, registration for the GST will start later this year and should be completed by November.

How will the GST be applied?

GST will apply to the supply or importation of goods and services, but will not apply to the input taxed supplies. If you paid GST for the making of GST-free supplies, you will be allowed input tax credit on purchases of goods used for it.

What are input taxed supplies?

Input taxed supplies are specific supplies that will not attract GST. Suppliers of input taxed supplies will not be able to claim input tax credit.

What is input tax credit?

All suppliers of taxable, as well as GST-free (but not input taxed) goods and services will be able to claim an input tax credit for GST paid on their purchases related to a taxable activity, by offsetting it against the GST charged to their customers.

What is "the credit for trading stock"?

Businesses holding stock on which they paid WST will be allowed a special GST credit to be offset against their GST liability. This will prevent inappropriate double taxation, enabling resellers to obtain the credit for WST paid on goods for resale, provided they claim the credit on returns lodged before January 22, 2001.

GST facts and figures

The GST will apply to all goods delivered and services performed after the implementation on July 1, 2000, a Government pamphlet claims.

The GST legislation will not allow input tax credit on goods bought before July 1, 2000.

Some business dealings entered into before the introduction of the GST will still have to take account of the new tax.

Items (excluding some luxury goods) that are currently taxed at the 32 per cent WST rate will attract a lower 22 per cent rate from the moment the bill is signed by the Governor General, before being replaced by the GST.

Companies with annual turnover of less than $20 million will be required to report to the ATO on a quarterly basis, while those with a turnover of $20 million and more will report (and consequently pay their GST) on a monthly basis.

It has been proposed that a business will have to pay its GST liability within 21 days of lodging a report.

4000 auditors will be recruited for the purpose of auditing every business on the handling of the GST. Records will have to be kept for up to four years.

The GST will have to be paid against issued invoices even if your customer has not paid.

The GST Calendar

A Senate Committee is due to report on the Tax Reform by the end of April.

The Senate needs to make a decision and pass appropriate legislation by the 30th of June.

If the bill is passed:

1. The GST will be introduced on 01/07/2000;2. GST registration should be completed by the end of May 2000;3. The Wholesale Sales Tax will be abolished by 01/07/2000;4. First lodgment of monthly electronic GST returns should begin in August 2000.

5. First paper and electronic GST returns will be sent to quarterly payers by the end of September 2000 and lodgments should begin in October 2000.

6. FID (financial institutions duty) and BAD (bank account debits) tax will be abolished by 01/01/2001;7. Most stamp duties will be abolished by 01/07/2001.productsQSP Financial Information SystemsThis is high-volume, high-transaction software aimed at the high-end market. Used by the likes of Qantas and Telstra, QSP Financials is a total financial management solution, comprising fully integrated, real-time accounting software that covers Asset Management, Purchases Management, Sales Invoicing, Project Management, Accounts Receivable, Accounts Payable and General Ledger.

As a multiplatform application, QSP Financials supports both client/server and legacy environments on mainframe, running the same source code on NT, Unix and DB 2 platforms.

Platinum Software

Platinum ERA 7.0 is Platinum Software's new mid-market financial application that tightly integrates the company's front and back office application suites to ensure all customer-related information is consistent throughout all Platinum ERA applications, including Sales and Marketing, Distribution, Manufacturing, Financials, Budgeting and Customer Care.

Platinum ERA incorporates advanced functionality, including supply chain management and enterprise business intelligence tools, and is fully Internet-enabled, with the Internet solutions including Commerce, for business-to-business electronic commerce, and Self-Service, for remote information access for customers, business partners and travelling employees. Additionally, Platinum ERA incorporates leading Microsoft technologies and is optimised to take advantage of the improved scalability and performance of Microsoft SQL Server 7.0.

Platinum ERA incorporates Microsoft Message Queue Server, Microsoft Transaction Server, COM architecture and XML documents to improve componentisation and support reliable integration between applications on different servers at different sites.

Systems Union

SunSystems comprises two fully integrated product groups, SunAccount and SunBusiness, which consists of a fully integrated ledger system, a fixed assets registers an allocations module, and a sales and purchase order processing and inventory system.

The parameter-driven structure of SunSystems makes it suitable for a wide range of organisational complexities, and comes with fully audited interfaces that allow the development of integrated solutions with third-party products without programming.

This Y2K certified, Euro and GST trialled system is suitable for all levels of the accounting software market.

SBT VisionPoint 2000

SBT VisionPoint is designed for small-to-medium enterprises. Based on open architecture, VisionPoint is easy to modify and use.

As a software with real-time capabilities, VisionPoint 2000 allows instant access to a full suite of modules that include General Ledger, Accounts Payable and Receivable, Purchase and Sales Orders, Payroll, Manufacturing, Job Cost, Time Billing and System Manager.

The system is scalable and has in-built electronic commerce and e-mail capabilites.

Written in Microsoft's database language FoxPro, VisionPoint 2000 runs in either DOS, Microsoft Windows 3.x or 95, complete with screen fonts, icons and other interface features.

SBT VisionPoint 2000 is distributed by Sydney-based Sarcom.

QSP (02) 9419 2044 Tel (03) 9820 9111

Platinum Software Tel (02) 9927 6202

Systems Union Tel (02) 9928 4400 Tel (03) 9823 6222Sarcom Tel (02) 9894 3434

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