Being GST-ready doesn't necessarily mean being GST- compatible . . .
It was refreshing to read MYOB's admission this month that they will not be GST-compliant by the 1st of July this year, although they will be GST-ready. I believe they speak for the entire accounting software industry. How can you claim to be completely compliant with something that is not finished? This new "simple" tax will be subject to numerous rulings by the Comm-issioner of Taxation before it will be finalised. There are just so many "grey" areas that require clarification.
As I have examined the detail in the new GST Act, the whole concept of a more simple tax was lost on me! Take for example, food exclusions.
Under the Act, cheese is GST- exempt while biscuits are not. If sold together in a hamper then GST would be paid on the biscuits and not the cheese. However, if they are sold together in a snack pack, then both are subject to GST!
Bread is GST-free. That is, of course, provided it is not iced. Hot food is defined as "food for consumption that has been heated above the room temperature or above the generally surrounding air temperature". Heated food is subject to GST, unless the heating is associated with its manufacture. Thus, hot-baked bread is GST-free, whilst toast is not.
Then there is the matter of GST-free food bought from a sandwich bar. If it is eaten on the premises then it becomes subject to GST. So, if you were to buy a carton of milk and an apple they would not attract GST.
However, if you opened the milk and began drinking while still on the premises, then both items would become subject to GST!
Premises, within the meaning of the Act, extend to include any surrounding land. Anyone want to buy a sandwich bar?
Then there is the subject of settlement discounts and rebates. When these occur, both the receiver and the giver need to make the necessary adjustment in their records, for example, where a sale of $100 + GST $10 takes place between A and B, with a settlement discount of 10 per cent.
On receipt of the money from B, A will need to acknowledge the taxable credit of the $11 discount. Ten dollars will be coded to discount allowed while the $1, representing the GST amount, will be clawed back from the government.
B on the other hand, will need to code $10 to discount received and reduce his claim on the government by the $1 reduction in GST paid on this transaction.
However, to enable B to make their claim, A needs to provide B with an adjustment note detailing the taxable credit. For suppliers offering settlement discounts this means that an adjustment note will need to be raised for each receipt and posted to the customer. This will be an added cost of settlement discounts.
If you think that there may be a scheme to remove you from this confusion Section 165-55 of the Act might raise some doubts in your mind. It states:
"For the purposes of making a declaration under this Subdivision, the Commissioner may:
(a) Treat a particular event that actually happened as not having happened; and(b) Treat a particular event that did not actually happen as having happened and, if appropriate, treat the event as:
(i) Having happened at a particular time; and (ii) Having involved particular action by a particular entity; and (c) Treat a particular event that actually happened as:
(i) Having happened at a time different from the time it actually happened; or (ii) Having involved particular action by a particular entity (whether or not the event actually involved any action by that entity)."
Makes you wonder what really is happening on July 1!
Marnie King is the International Business Development Manager at Solomon Software. Reach her at email@example.com.