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Mice Net : October 2008
legal issues not sexy but… GST AND ABNs Story By Matt CrouCh you could be liable for 46.5 per cent of the price you’ve just paid for goods and services? fact that the GST and ABNs have been with us since 2000, confusion still reigns and I thought it was high time we got a few things clear. M Q: What happens if I purchase goods or services and the supplier doesn’t quote an ABN? A: This is a separate issue to GST. If a supplier fails to quote an ABN, you are obliged to deduct “no-ABN PAYG withholding tax” and pay that to the tax office. The no-ABN PAYG withholding tax is 46.5 per cent of the amount payable to the supplier – a hefty proportion. It is your obligation as buyer. If you have paid the full price to the supplier you may find yourself liable to the tax office for 46.5 per cent of the money paid. In other words, you might be walloped for close to half of the price. Further, you would also have to register for withholding under the PAYG withholding system. Accordingly, you should always ask the supplier whether it has an ABN and require that the supplier quote its ABN. The easiest way to ensure that the ABN is quoted is to make sure the supplier’s ABN is on the relevant documents including the contract, invoice or statement and receipt. You should always make sure your supplier quotes its ABN before you pay the price. If you have regular suppliers, you don’t have to obtain the ABN every time but good practice says the supplier will have its ABN on all relevant documents concerning the transaction anyway. Q:What if the supplier does not have an ABN? A: You will still have to withhold 46.5 per cent of the price and pay it to the tax office. Q: Does it matter whether the relevant supply is a taxable supply? A: No. The obligation to withhold 46.5 per cent of the price applies here as well. Q:What about overseas transactions? A: If you acquire goods or services for your business from overseas suppliers (who do not have a permanent business establishment in 32 mice.net ost of us in the meetings and events sector have gotten used to the idea of adding 10 per cent GST to the price of our goods and services and quoting ABNs. But despite the Australia, such as a branch office or agent, the supplier does not require an ABN and you are not obliged to withhold no-ABN PAYG withholding tax. Q:Where can I check ABNs? A: ABNs can be checked at the ASIC website at http://www. asic.gov.au/asic/asic.nsf. Use the search engine provided and it should show you the ABN, where the company has one. Q: I understood that I always had to display my company’s ACN. Do I also have to display the ABN? A: Many companies fall down here. The Corporations Act requires companies to include their Australian Company Number (ACN) on all “public documents”. This would include letterheads, invoices and promotional material. Q: Many of my suppliers and competitors still do not mention GST in their pricing – what is the consequence of this? A: All businesses should quote their prices “inclusive of GST”. Contrary to popular belief, this is not part of the tax laws, but a policy of the Australian Competition Consumer Commission (ACCC), which has responsibility for regulating and enforcing the Trade Practices Act 1974 (Cwth). The ACCC has made it very clear in its published material on GST that businesses must include GST in their displayed or advertised prices. The following would generally be acceptable pricing formats: • “Widget - $110.00 including GST”; and • “Widget - $100.00 plus $10.00 GST = $110.00”. The following are most likely to be unacceptable pricing formats: • “Widget - $100.00” (then seek to recover an additional $10.00); • “Widget - $100.00 plus GST”; and • “Widget - $100.00* (footnote - *plus GST). The penalties for breach of the Trade Practices Act are severe and competitors claiming loss could sue for damages and injunctions. Use the ABN to help identify your customers and suppliers and always ask suppliers to quote their ABN, otherwise you’ll be liable to pay 46.5 per cent of the price to the ATO. Whenever you are thinking about your prices or fees, or reimbursement for expenses, remember to expressly refer to the GST.