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Pricing Your Services for GST
For bookkeepers and tax agents, GST is often one of the more confusing aspects of Australia tax. We cover GST reporting in our MYOB training course, but long before you come to doing financial reports, you need to ensure your clients are accurately collecting GST in the first place — something many new business owners have trouble with, and often do so incorrectly.
We were recently speaking about how business owners should price their services in relation to GST with Julie Guest, an accountant, auditor and the secretary of YNH Services, a neighbourhood house in the community of Yarrawonga, regional Victoria. YNH Services is a registered training organisation, providing learning and development opportunities to the local community through training courses, seminars and community events, and it’s where Julie regularly teaches a business course for small business and soon-to-be business owners.
When discussion turns to setting prices, invoicing and collecting GST, Julie has one golden rule: “The price is the price,” by which, she means that business owners, if they’re registered for GST, need to set their prices to automatically include the GST component.
Automatically Include the GST!
Julie says that the reason prices should always be inclusive of GST is because it is already implied. “People assume the final price on a tax invoice contains GST,” so business owners need to ensure that any prices they quote or advertise does, in fact, include GST.
But this is where a problem arises; when business owners who are registered for GST advertise their products or services as being exclusive of GST. “It seems people are using it as a marketing ploy to advertise something at $100 plus GST because it sounds cheaper than $110, even though that actually is the price,” Julie says. This can be confusing to the consumer when today it is really standard practice to purchase something, at the supermarket, for example, where GST is included in the price.
It’s for this reason that Julie goes back to her golden rule: the price is the price. If you’re registered for GST, you need to supply your clients and customers with a tax invoice — not an invoice which is what business that aren’t registered for GST would use — that shows the final price, including GST. If you choose to break down or itemise the GST on your invoice, that is your prerogative, though you don’t really have to. If you’re not registered for GST, issue your clients and customers with an invoice — notice the absence of the word “tax” since you’re not collecting any tax. It is also handy to include a note that says that you haven’t charged any GST, though, agin you don’t really have to do that either.