Talking Cents
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Small business understanding GSTConfronting and understanding GST need not be a scary experience, but often we see our small business clients come to us who have already started their new business venture without first understanding how GST works and how it can impact on their administrative requirements and cash flow needs. With few exemptions GST is a tax imposed on the end consumer of a product. You may think that as a small business owner you are being hit with the GST because you are the one paying the money to the tax office, but in reality this is not the case. You are the collector of the GST but not the payer. It is your customers that are paying the GST to you when they buy your products or services, it is then your responsibility to pay that GST to the ATO via your monthly or quarterly business activity statements. Unfortunately, it is an all too often occurrence that as soon as a business has any sort of financial distress the ATO is the first creditor to miss out. This is down to the fact that you will see the income from your customers coming into your bank account and, assuming it is all yours, use it to fund your business as a part of your working capital. It is essential that any small business operator understand that virtually 10% of everything they bank, does not belong to them and should be set aside, if not in a separate bank account, then at least noted on a regular basis, to ensure that these funds are not used to fund a poorly performing business. If you find that you are struggling to meet your monthly/quarterly BAS obligations then it is highly likely that you are using the GST money as a source of working capital or even worse, spending it on yourself! There are certainly better, more efficient means of running your business than this and of course the best way to discover these is with a friendly but frank chat with your local small business accountant! |