Although GST will not be charged on wages and salaries, people working on contract need to be sure their agreement is GST compliant, said Murray Deakin, trade practices specialist and a partner with KPMG Legal.
"The earlier these issues are addressed, the better," he told PC Week.
"The first thing contractors should do is review their contracts and find out what it is they need to do." People need to determine the impact of the GST on the supply of their services.
According to the Australian Taxation Office, whether GST is payable or not depends on the terms of a contract. If a contractor is earning more than $50,000 per annum, they need to be registered for GST-and need to be charging it.
On the whole Deakin believes the impact of the GST on contractors will depend on their contract conditions, so "it's hard to make general conclusions," but people should get independent advice.
Long-standing contracts may need to be renegotiated to include a GST component, but "companies are under no legal obligation to renegotiate the contract," he said. However, from a company point of view, "they can't lose". Companies can claim Input Tax Credits for GST paid in the course of business, and that includes dealings with contractors. For contractors, covering themselves for GST may not be as simple as adding 10 percent to the bill. People shouldn't only be looking at compliance and financial and IT systems issues. Contractors need to look at "what the cost impact is going to be" across their whole business, according to Deakin.
Contractors should work out, with the help of a professional adviser if necessary, what the impact on operating costs will be. At the same time, Deakin points out that there will be strict overseeing of price changes in business. The Australian Competition and Consumer Commission will be watching price changes very carefully, he said. Starting next month the ATO will be holding seminars about the new tax system, in association with industry bodies, looking at specific industry needs. For more information about contracts visit the ATO Web site at www.taxreform.ato.gov.au/busihome/index.htm or call the GST hotline on 13 24 78.
PC Week would like to hear readers' concerns about contracting and the GST, and will put questions to the ATO for a future issue. If you have a question or comment, send e-mail to dianej@zdapn.com.au
