We’re really starting to see the impact of the GST rate increase starting to bite. Rates notices have been issued by local authorities, insurance companies have renewed policies and many other arrangements spanning the 1 October rate change date are appearing every day.
You might be renewing your gym membership, magazine subscription or tuition fees.
Thanks to recommendations from the GST Advisory Panel there’s new legislation working its way through Parliament which will make life a little easier for some businesses and their customers who were going to be caught out by the change.
Layby sales is a good example. GST is paid by the retailer when the goods are delivered to the customer. So if you started the layby sale contract in May 2010 when the GST rate was 12.5% but pick up the goods in December for xmas the new rate of 15% will apply to the entire sale. Either the retailer or you, the customer, will have to pay the increase.
The new rules proposed in the legislation will allow payments under the layby sale made before 1 October to be charged with GST at 12.5% provided certain conditions are satisfied. One of those conditions is that the retailer chooses to take advantage of the transitional rule. I’m sure most customers with layby sale arrangements would prefer their retailer to take advantage of the new rule rather than pass the GST increase on to them. So I encourage you to speak to the retailers of any products you have on layby and find out what they intend doing.
There are other similar rules where it is up to the business to decide whether they are going to take advantage of the opportunity to charge GST at the old rate on goods and services sold before 1 October including insurance contracts, finance leases and others.
It’s a reasonably complicated area but as a general proposition, not applicable in every case but certainly in many, if you want to lock in a 12.5% rate then pay for the goods or services before 1 October.