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Thursday, 01 June 2000

Peter Switzer photo
Peter Switzer

    A new column by Peter Switzer

    Anyone who joined in the chorus of commentators lamenting the Budget work of Treasurer Peter "Claytons" Costello proved that they have never owned or run a business. Or else they have not thought through the sea level change that will come out of the GST and later the Ralph reforms to business taxation.

    Given the anxiety accumulation that is swelling as small business proprietors start to contemplate the actual implementation of the GST, nothing new to really take on board from the Budget was not only smart politics but also smart business policy.

    It might also indicate that the concerns and complaints from small business leaders and accountants that most small operators don't know how the tax will affect their business in total is getting through to Canberra.

    A recent Melbourne Institute survey of 1200 householders showed consumers haven't a clue about the GST. Although small business has, I suspect, a better grasp on the tax, after conducting close to 60 small business GST seminars, their understanding level is at best okay.

    Countless proprietors I've talked to admitted that they have not got a clue about the GST and will be relying on their accountant. Others who have learnt the critical issues connected to their business have not actually implemented or taken a trial run of their new systems.

    Few have started practising filling in a Business Activity Statement that will carry the GST return and income tax payments on either a quarterly or monthly basis. Hardly anyone knows what prices their suppliers will come up with after 1 July and this means a snowball is rolling with everyone wanting to know what everyone else will be charging and this ignorance "ball" is growing daily.

    Of course, every business in the country should be sifting through the many initiatives from the New Tax System to analyse the potential cost gain and saving. This includes the compliance cost impost. The net result of these calculations should be added to the altered price impact of the GST replacing the current sales tax.

    After all that - bingo! We would have our new price in a GST world. This price then had better end up being close to the predicted price rise published by the Australian Competition and Consumer Commission for a given firm's industry or there could be a marketing/customer relations problem.

    Worse still, there could be a reduced profit situation to keep expectant customers happy or an ACCC investigation and fine could follow. The maximum penalty is $500,000 for an individual or $10 million for a business.

    And then there's the even more tricky situation of the sinking dollar and the consequent cost increase.

    The Motor Traders Association of Australia, in particular, has pointed to depressed foreign exchange rates and how the ACCC's prediction of a $30,000 car falling by $2450 as deplorable.

    Some businesses will be coping with dealing with a new computerised bookkeeping system while others could have been culled from their accountant's client list because they will be too much like hard work after 1 July.

    And then there's that four-letter word - PAYG or Pay As You Go.

    Not long ago I asked a grand ballroom full of a a leading company's best, self-employed agents, who had read the Government's Guide to Pay As You Go for business booklet? The reply was lucky to be 5 per cent.

    This is a good clear read, however the national problem prevails - there's a lot to do, not much time to do it, and we're all very, very busy.

    Leading accountants are telling us that before 1 July we need to:

    * Do stocktakes; update our accounting systems, identify and review all agreements that live beyond 1 July

    * Calculate price changes

    * Do a GST upgrade for point of sale equipment; "GST-ise" stationery

    * Check suppliers for GST-readiness

    * Prepare a policy for non-GST charging businesses

    * Get the GST administration system right for collecting tax and tax credits for the Business Activity Statement

    * Train staff

    * Notify your insurers before 30 June of any entitlement you have to input tax credits on insurance premiums

    * And make sure your cashflow and stocks are right for the first quarter of 2000-01.

    Oh, yes, and there's our most important focus - making sales, employing people and turning a profit.

    If ever there was a time for a government to be praised for doing precious little for business in a Budget this was one of them. Given the workload resulting from this new tax system, we simply do not need to hear any renditions of that old number - "We're from the government and we're here to help."

    Peter Switzer is small business editor for The Australian and business editor for Sydney radio station Mix 106.5 FM. He is author of two best-selling books: Who's Afraid of the GST? and Your GST Questions Answered. He also adapted the American book, The Complete Idiot's Guide to Getting Rich for the Australian reader.

    He has been runner up on two occasions as the radio industry's best current affairs commentator and named in the nation's most sought-after speaker list by the Sydney Morning Herald in 1999.

    Switzer has been business reporter for SBS's Insight program and is a regular commentator on programs such as Seven's Today Tonight.

    He was an economist at the University of NSW between 1979 and 1994 - but says he is over that now, so that he can focus on writing this column every month.


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