GST – Never Assume

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Recently there was a discussion amongst VAs about GST (goods and services tax) and whether it should be assumed it’s included or not when negotiating rates with subcontractors. The main contractor VA got a bit of a shock when her subcontractor submitted an invoice for work including GST.

So if you don’t charge GST should you assume everyone doesn’t – or assume everyone does?

Current GST law is that you do not need to register for GST unless your business reaches a certain threshold of business income in a year – currently $75,000. The current law also states that if you ARE registered for GST, all prices quoted should be quoted as GST inclusive.

In this instance the main contractor did not charge GST and the subcontractor did. The main contractor got a bit of a shock when the subbie’s invoice came with the agreed upon hourly rate but then added 10% for GST.

I guess the lesson here is ‘never assume’. If you don’t charge GST be sure to make that clear to your subcontractors. If you’re a subcontractor who does charge GST don’t assume that your head contractor also does.

I don’t necessarily believe it’s important to include this on your site as a stand-alone announcement – but if you do include your prices on your site on a Rates page for example, ensure that you have a statement there indicating whether they are inclusive or exclusive of GST.

Quoting a price to a client and then sending them an invoice with 10% added may come as a bit of a shock if they weren’t advised upfront that the quoted price was exclusive of GST. Better yet, follow current GST legislation and ensure all your prices are inclusive of GST if you are registered. And add extra protection by including this in your contract.

© Lyn Prowse-Bishop – www.execstress.com

3 comments

  1. Excellent points Lyn, something we all should be aware of …

  2. Hey Lyn
    Good points. I like to always be crystal clear. My proposals will always say right next to the figure that it includes GST. If you don’t charge GST, I would state that also.

    On an associated matter, I would seriously look at being registered for GST even if you were below the $75,000 limit. The added effort to process the invoices is limited. Most software will generate your BAS info within 5 minutes and it doesn’t take much effort to submit it to the tax office.

    But when you say you don’t charge GST it raises doubts. It can become a barrier for a prospect you could easily remove. They may think you are not professional. Maybe they will think you don’t have much work so will only treat their work as a “hobby”. Not charging GST call also have a negative impact on your profit margins.

    Quite simply, I would remove the perceived barrier for a customer by being registered for GST. Take on the big business mind set. Then, as per your original article, ALWAYS specify the fee with GST included.

    Warm regards

    Warwick

  3. execva says:

    Thanks for posting Warwick! I do have to disagree with you though re registering for GST. I’ve been in biz now since 2000 and I’m still not registered. I’ve not found it to be a deterrent to any potential client. I tell them at initial contact that I’m not registered because under current legislation it’s not mandatory for me to be. But that I do – as per current regulations – have an ABN which is more important and a requirement for doing business.

    I have found without exception that once a client understands there is no need for GST registration they don’t care.

    My invoices also contain a statement that I am not required to be registered for GST – which IS a requirement if you aren’t registered.

    With any luck the ALP will stick with their recent announcement that changes to PSI legislation aren’t government policy and GST registration won’t become mandatory! 🙂

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