The goods and services tax has been around for well over a decade but it still causes headaches for businesses when it comes to managing cash flow.
It’s all about timing and being aware of the rules that may help. "Often business don’t really analyse their cash flow from a tax perspective and therefore don’t effectively manage GST throughout," says KPMG’s Kate Law, Partner, Indirect Tax.
Law has five tips to help:
1. Analyse your data
Use data analytics tools to map your GST in-flows and out-flows so you can more easily understand the effect GST is having on your cash flow.
2. Check your invoicing and payments
Aim to reduce the time between paying GST to a supplier and being able to collect a credit from the ATO.
3. Negotiate special terms for large payments
For any irregular, large transactions, where you’ll be paying a large amount of GST and are entitled to a credit from the ATO, negotiate with your supplier to complete the transaction closer to the time you lodge your BAS.
4. Don’t forget the import GST deferral scheme
Importers, who must hand over the import GST amount when they collect their goods from customs, can apply to defer payment until their BAS is lodged.
5. Be careful with the paperwork when buying or selling a business
If you structure it appropriately, the sale or acquisition of a business can be free of GST. But if you don’t meet all of the ATO’s requirements, you will miss the opportunity and have to pay GST as well as any stamp duty on the GST-inclusive price.
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