* For those who missed Australian Reseller News this week (November 8, 2000), here is the page one lead story we published.
This week marks the final deadline for Business Activities Statement (BAS) submissions and the channel's financial controllers have their collective taxman hats on preparing to fill in the blanks, cross the Ts and dot the Is in the first round of the new tax system declarations. But the big issue for many resellers is having to battle with incidental and unforeseen problems associated with the Activities Statement, and the additional cost these will incur.
While the majority of the channel is quietly confident they'll get the BAS right eventually, most are plagued by idiosyncrasies that seem to be hamstringing the Government's utopia of a single, online tax system for Australian businesses.
Keith Stockley, business manager at CRM integrator AtoB Holdings, has been plagued with problems over the Activity Statement from day one after the company changed its name from Access To Business, while it registered an additional company in the past few months.
"There are thousands of companies which are having problems with this thing," Stockley said. "The ATO [Australian Tax Office] has gone out of its way to make this clear to businesses, but I don't think they've gone far enough.
"I've spoken to [ATO representatives] on the phone and a lot of the time the biggest issue is trying to explain the problem you have so they can understand. I come from South Africa so I talk a little differently, but some of these people on the other end can't speak English."
Stockley also noted that, whilst the company is on the quarterly system, it still has to submit PAYG forms monthly, which makes the BAS partly redundant.
Central to many channel companies' concerns are what the ATO dubs "transitional contract" agreements for ongoing service and support, that where signed prior to July 1, 2000. Stockley is quick to point out a discrepancy on the Activity Statement form where there is no field to explain a sale being made in full before the GST transition that still enables companies to show GST collected on support agreements after this date.
In order to collect GST for three months from July 1, companies must attribute on-going service agreements to a sale on the BAS. But if the sale was made before July 1 and the company includes this on the BAS, many channel companies fear they run the risk of being queried by the ATO for misleading tax declarations.
A spokesperson from the ATO informed ARN that the Office is aware that income records will not match up with GST records for transitional contracts on the first round of Activity Statements. The spokesperson defended the format of the BAS, claiming transitional contracts will only affect the first one or two Activity Statements. As such, the ATO wants to have a consistent BAS format for its scanning software "for some time", the spokesperson added.
"If the company has put in a genuine effort to get it right and on time, late lodgment penalties will be remitted," said fellow ATO spokesperson Leonora Nicol.
The ATO has received 250,000 early BAS submissions (as of last week), which is higher than expected, Nicol claimed. Furthermore, the Office is expecting a lot of companies to take up its offer of free consultation with an ATO officer under its BAS Help Week, which kicked off last Wednesday.
However, Nicol was reticent when approached by ARN about claims of a communication breakdown between businesses and ATO representatives. Similarly, tax commissioner Michael Carmody slammed media hype recently, in a statement which said: "Claims that small business face large penalties over the BAS are completely baseless".
Barry Hammond, principle consultant of Sydney-based WebNetc, has finished filling in the BAS but hasn't paid it yet due to the company's bank not offering BPay over the phone directly to the ATO. His alternative is to pay it via Internet banking. This is not a problem, he said, for an Internet consulting company like WebNetc, but highlights the myriad of problems inherent in the Activity Statements.
"In principle, I don't have a problem with the tax," Hammond said. "But in saying that, we have had to do a lot of backtracking through our records to make sure we get it right the first time, which I don't think we'll have to do again. A lot of hype and fear was created around [the BAS] and now that I've done it I think it will become routine," he added.
A number of companies are placing a lot of faith in off-the-shelf accounting packages that have BAS functionality, although widespread reports indicate a number of these packages could contain flaws. Felicity Stoward, CFO of security integrator eSec, claims the company has been holding off from completing its Activities Statement, preferring to dedicate its finance team to completing the Activity Statement over the course of a whole week.
Although eSec is confident that once the first BAS is completed the next will be easier, Stoward is concerned about having to account for sales of company assets and complex sub-contractor agreements under the BAS guidelines.
Stoward claims it is hard to quantify the additional expense, in terms of administration and billing costs, to the integrator as a result of the quarterly reporting structure. eSec has changed its customer billing to monthly rather than annually for large service contracts.
"This is probably better for the customer because a monthly charge is easier to swallow but it means we have the extra paperwork," noted Stoward.
On the distributor front, Scott Baird, channels account manager for IBM storage distributor BlueStor, claims his accountants actually find the BAS system easier to manage than the previous wholesales sales tax system.
However, of the channel companies, retailers may face the biggest challenge with the BAS, as they face cash flow issues and, for many, the added burden of not having in-house accountants. Darek Dziedzic, general manager of Perth computer retailer Navada, claimed the company has to "bear the additional cost" of getting the Activities Statement signed off by its accountant.
"The thing is, [the BAS] affects your cash flow. We used to have to do a tax return once a year, but now we have to do one every three months. This means you have to fork out another couple of thousand dollars in tax every quarter," Dziedzic claimed. "But then we don't have to pay wholesales sales tax, so I know economically it works out at about the same in the end."
As a result of confusion, the Federal Government has extended the BAS lodgment deadline until November 11. Around two million BAS forms and about 1.7 million Installment Activity Statements have been sent out nationwide. The ATO is setting aside 50,000 free consultations to companies in the week leading up to November 11 to assist with their BAS declarations. The Government's intention is to push a lot of tax administration online. While the concept could be considered progressive, anyone pouring through the hundreds of pages of documents on the BAS alone, will agree it's nearly enough to say "sod it" and pass the task on to an accountant at an exorbitant cost. This may be good news for accountants, but not so great for many of Australia's 6000 resellers struggling to come to terms with the new system.
For late submissions call: 13 28 66. For general information call: 132478