Widened GST could net $70 billion and save hassle for SMEs

The Australian government stands to make over $16 billion this year, and a total of $70 billion in the next three years, were it to expand the Goods and Services Tax to include food, education, health and financial products.

The figures come from Treasury modelling released yesterday.

Economists have often called for broadening the GST, and yesterday’s figures are likely to be welcomed by the SME community too, which currently collects and passes on GST to the government.

Council of Small Business of Australia chief executive Peter Strong tells SmartCompany he thinks most small businesses would jump at the chance to just apply GST to everything.

“GST isn’t a problem for all small businesses, but it can be very hard for some businesses to administer,” he tells SmartCompany.

“I had a bookshop and I charged GST on everything. So that was no problem at all.

“But say you own a chemist. The pharmacy sector is the hardest. The way it works for them is they pay GST to their suppliers, but then have to claim it back from the government when the goods are sold. So you find many of them having to do a complete stock-take every month. It really impacts their cash flow.”

Smaller food retailers are also affected, because some grocery items are GST-free, and others are not.

“Retailers will make sure their cash registers take note of what does and doesn’t have GST. But it can be confusing, and at the end of the month, you have to double-check and it could cost you money, or leave you with a fine.

“And you sometimes have debate with customers, with them asking why a good has GST on it or not. There’s a great deal of confusion around some products, like whether something is a medicine or a cosmetic, for example.”

If GST was put on everything, or at least on all retail goods, such calculations would be easy for small businesses, Strong says.

The federal government is in deficit, and economists predict its outlays on things like welfare could soon become unsustainable due to Australia’s ageing population. The government has tasked a Commission of Audit to identify ways it can save money.