>Monday 26 November 2001

The new tax system is now almost 18 months old. Teething problems are still occurring for the Tax Office, and the effect of GST on property sales continues to cause concern.

In a letter sent to tax practitioners last week, the Tax Office notified the industry of a system error that resulted in taxpayers being advised of incorrect PAYG instalment rates.

The error meant that the instalment rate notified was less than what it should have been. This error was discovered in time for corrections to be made to the September business and instalment activity statements.

The Tax Office in its wisdom did not notify taxpayers of the original error. As a result, taxpayers had a notice showing one instalment rate while also having an activity statement that stated another, higher rate. The Tax Office has advised that it has done something about it, and taxpayers will not be disadvantaged or penalised as a result of the confusion caused. This can only mean that where the lower rate has been used taxpayers will not receive penalties as a result.

The application of GST on property sales continues to be confusing for many people. In most cases real estate agents add to the confusion by not properly understanding how GST affects their industry, a situation exacerbated by the fact some legal documents have clauses allowing for GST to be passed on to the purchaser if applicable. If the basic rules of GST are applied there should be no confusion.

The first rule of GST is that only entities registered for GST can charge GST. If you are a private person selling anything, including a property, and you are not registered for GST no GST can be charged. Where the property being sold is a home that is not new, in other words someone has previously lived in it, no GST is payable on the sale price no matter who sells it. For GST to be payable on a property it must either be a new home or a commercial property and it must be sold by a registered entity.

If an entity is registered for GST only items connected with the business are affected by GST. Anything sold that is not connected with the business does not have GST added to the selling price. For example, a plumber selling his private home or car does not include GST in the sale price. If, on the other hand, the plumber was selling his work vehicle GST would need to be charged.

Despite these problems the Tax Office, business owners and the general public should feel some satisfaction in having successfully negotiated such a massive change to tax collection in Australia.

A recent report released by the Tax Office has revealed just how big a job the introduction of the new tax system was. Even the Tax Office underestimated in a number of key areas how big the task would be. The original budget estimate for GST registrations was 1.5 million, with an estimated 2.1 million phone calls to be received about the new system.

Up to June 30 last year registrations for the GST numbered 2.19 million, an increase on the budgeted estimates of 46 per cent. Another 741,000 registrations were processed during the 2001 tax year. The estimate of phone calls fell short of the actual number by 95 per cent, with 4.1 million calls being received.

The telephone help line was not the only means of support provided by the tax office. The ATO's tax reform internet website proved popular, with 110 million hits in the first year. The statistics relating to the other forms of assistance and education include 12 million publications about the new tax system being distributed, 232,000 field visits being made and 27,200 BAS help interviews being conducted. About 68,000 written requests for technical advice were answered.

The Tax Office calculates that the total cost of implementing the GST and the rest of the new tax system to be $615 million. This meant the administration cost of collecting each $100 in revenue was $2.53. This represents a profit margin of 97.5 per cent, a result most business owners would love to emulate.

Compared with other countries, the ATO's result is not as good, with the international average being $1.51 for each $100 collected.

Another area where Australia did not compare favorably with international benchmarks was the ratio for the number of GST registrants per ATO staff members working on the GST. The international average was 305 registrants per staff member compared with Australian registrants of 410 per ATO staff member. This lower number of ATO staff dedicated to the GST registration process was a major factor that led to Australia's cost per registrant being $280 compared with the international average of $333.

The Age

-- Anonymous, November 27, 2001