While GST awareness is high, action and implementation are low, spelling trouble for businesses from July 1. So says KPMG Consulting partner Mandy Holloway.
While GST awareness is high, action and implementation are low, spelling trouble for businesses from July 1. So says KPMG Consulting partner Mandy Holloway.
Speaking at the upcoming CFP conference, Holloway says planners need to examine ways to prepare for the GST, while also identifying its impact and gearing busi-nesses for the new tax.
“This is not a new business tax at all but rather a transaction tax and since transactions differ with different business methods, the impact on each business differs,” Holloway says.
The only thing that remains constant across any GST considerations is the cost of the new tax and where that will be recovered in the process of products and advice. Holloway believes that there is still some uncertainty in that area. She believes financial planning businesses need to examine business links be-tween advisers, dealer groups and fund managers to seek clarification as to where those relationships, and any fees and commissions involved, will stand in the new tax year.
She also believes that while many planners have in the past spent time doing business, they have not been managing their business. “The GST will put more pressure on survival so the need is to understand this impact before it ar-rives.”
While this is happening on an intellectual level, Holloway says lack of action is now the main concern.
“People are up to speed technically but are not business ready. Few have dealt with clients about the GST, let alone suppliers and business processes involved. There seems to be a real divergence of preparedness,” Holloway says.
To recover from a late start, Holloway says a rough action guide would cover five areas – selling, buying, recording, legal and survival.
The first two would examine the areas of supplier and customers, pricing struc-tures and ensuring that relevant parties are registered and working within the Australian Business Number system (ABN), Holloway says.
“Failure to do this would make it impossible to claim tax credits or even do business with other registered businesses.”
The recording area would examine all the necessary documents needed to ensure the first two areas are adequately noted and tracked for compliance and tax pur-poses. The legal would ensure all business relationships comply with the law and outlines costs, obligations and responsibilities.
“Lastly, survival would examine the steps necessary to manage cash flow and capital management,” Holloway says.
“This is important under a system which will see businesses increase their cash flow for a short time, before passing those funds onto the Government as a quar-terly GST tax payment.”
