Reading time: 3 minutes

The discussion around increasing the Goods and Services Tax (GST) is heating up again following the Council of Australian Governments (COAG) late last year. A study, also released at the end of last year by the Parliamentary Budget Office, looked at several different options which included raising the GST to 15%. Although other tax breaks would likely accompany the proposed increase, full details of the plan haven’t been confirmed. 

What Is the Proposed Changed?

The proposal would increase GST from 10% to 15%. A reported benefit by the Parliamentary Budget Office includes increasing revenue by $130 billion in 2017-2018. The report also indicated that lower income earners would be negatively affected by the changes if no specific concessions were put in place.

An increase in overall revenue would also likely provide the opportunity to make tax cuts in other areas such as stamp duty, reduce company tax and still provide concessions to low-income earners who are affected by the change. Some state leaders including NSW Premier, Mike Baird, support the increase, particualrly for the funding assistance it could provide around health and education.

What Are the Implications for Small Business if the GST Rate Does Increase?

The new reforms could affect small businesses in the following ways: 

  • The cost of running a business would likely increase, for example, phone bills and professional services where GST is charged.
  • Businesses would need to decide whether they keep the prices the same or take on the burden of the extra 5%.
  • There may be pricing issues depending on whether the business is between contracts, working with clients or selling directly to the public.
  • Major deals may have been decided on specific pricing, so it’s important to have transitional provisions in place.

There are also a number of accounting systems changes you should consider looking at to ensure that you and your business can respond quickly when the change occurs, for example: 

  • Consider payment cycles to see whether they can be altered or changed to make sure you are not negatively affected by the change; and 
  • Seek advice from a tax accountant to ensure that you are meeting your tax obligations.

Key Takeaways

Although discussions are currently taking place around increasing the GST from 10% to 15%, Federal and State governments remain undecided how to restructure the raise. It’s also unclear how the proposed concessions to low-income earners may temper some of these concerns.

Another proposal would be to increase the base of the GST rather than just increasing the rate. As with the GST’s first introduction, political discussions and savvy PR helped prepare the public and businesses for the change. We are keeping a close eye on the proposed changes and will keep you updated.

 ***

What do you think? Tag us on Twitter @legalvision_au and let us know or ask LegalVision’s taxation lawyers on 1300 544 755 or fill out the form on this page.

Webinars

How Franchisors Can Avoid Misleading and Deceptive Conduct

Wednesday 18 May | 11:00 - 11:45am

Online
Ensure your franchise is not accused of misleading and deceptive conduct. Register for our free webinar today.
Register Now

New Kid on the Blockchain: Understanding the Proposed Laws for Crypto, NFT and Blockchain Projects

Wednesday 25 May | 10:00 - 10:45am

Online
If you operate in the crypto space, ensure you understand the Federal Government’s proposed licensing and regulation changes. Register today for our free webinar.
Register Now

How to Expand Your Business Into a Franchise

Thursday 26 May | 11:00 - 11:45am

Online
Drive rapid growth in your business by turning it into a franchise. To learn how, join our free webinar. Register today.
Register Now

Day in Court: What Happens When Your Business Goes to Court

Thursday 2 June | 11:00 - 11:45am

Online
If your business is going to court, then you need to understand the process. Our free webinar will explain.
Register Now

How to Manage a Construction Dispute

Thursday 9 June | 11:00 - 11:45am

Online
Protect your construction firm from disputes. To understand how, join our free webinar.
Register Now

Startup Financing: Venture Debt 101

Thursday 23 June | 11:00 - 11:45am

Online
Learn how venture debt can help take your startup to the next level. Register for our free webinar today.
Register Now

About LegalVision: LegalVision is a commercial law firm that provides businesses with affordable and ongoing legal assistance through our industry-first membership.

By becoming a member, you'll have an experienced legal team ready to answer your questions, draft and review your contracts, and resolve your disputes. All the legal assistance your business needs, for a low monthly fee.

Learn more about our membership

Need Legal Help? Submit an Enquiry

If you would like to get in touch with our team and learn more about how our membership can help your business, fill out the form below.

Our Awards

  • 2020 Excellence in Technology & Innovation Finalist – Australasian Law Awards
  • 2020 Employer of Choice Winner – Australasian Lawyer
  • 2021 Fastest Growing Law Firm - Financial Times APAC 500
  • 2020 AFR Fast 100 List - Australian Financial Review
  • 2021 Law Firm of the Year - Australasian Law Awards
  • 2019 Most Innovative Firm - Australasian Lawyer