Planning the implementation of the Goods and Services Tax (GST) in your business raises a host of issues that need to be managed to ensure a smooth transition to the new tax regime. This article flags some of the issues to be considered to ensure your business computer system, or your clients’ business computer systems, are compliant with the GST.
There has already been some discussion and advertising about ‘GST-compliant information systems’. Information technology tends to focus on the hardware component of the information system and it is the stuff you can kick (it tends to be electronic hardware), while the information system is the combination of hardware, software, data (including data base systems) and business processes.
Your generic accounting system (for example, off-the-shelf products like Quicken, M.Y.O.B., Attache, Accpac, Great Plains Dynamics) will need to be able to produce Tax Invoices and Adjustment Notes. At a minimum, they should use Tax Codes in Accounts Payable to determine and allocate the GST into the categories that are required for your Business Activity Statement (BAS) return. Potentially, changes to the payroll system will be necessary (although PAYG has the larger impact on payroll systems).
Most off-the-shelf packages are GST-ready but not yet compliant. We are all awaiting the release of the final the GST regulations before product compliance can be completed by software vendors. Installing or implementing the GST upgrades is often no simple matter. Upgrades can be purchased from vendors but are usually downloadable from a web site or some other location. This can often be more complex than it sounds, and may require a project management perspective.
If your main accounting system imports data from any other system, then changes in one system (e.g. your accounting package) could affect the way that data is imported (for example, a subsidiary system for billing clients for photocopies used). The subsidiary system, although not directly impacted by GST, could be affected indirectly by the need to change the data export routine. This routine juggles the information being exported into an appropriate format to ensure data integrity as it travels from one type of software to another.
A major concern when considering systems and the impact of the GST is not only the need to change the system, but also how easy it is to make changes to the system. If it already takes a month to make a small change, making the change to your system for the GST is likely to take significantly longer.
Staff retention and engagement
In the current tight employment market for information technology and accounting professionals, it is very difficult to be certain that your information technology and/or accounting professionals are going to be available to make the changes you need to your system. You need to ensure access to professional staff with the required skills, whether they work for your organisation or are external contractors, at the time your business needs to implement the GST.
The off-the-shelf packages like M.Y.O.B. and Quicken that were mentioned previously are relatively easier to fix for GST compliance than are the in-house, custom-designed systems: the vendors have teams of software developers working on it. If you have systems that were developed internally, your organisation needs to ensure GST compliance. This will not be cheap, easy or fast. If you have in-house systems affected by the GST, then work on them should start immediately.
Non-traditional information systems
Although not usually thought of as ‘accounting information systems’, or ‘computers’, the humble cash register and other non-traditional systems need to be considered for their compliance with the GST. For example, can they provide tax invoices as dockets? An upgrade may be required; in other instances, a new system might be necessary.
Almost all businesses that currently do their accounting manually will need to seriously consider the purchase and implementation of new computer systems. Managing the GST manually is a very inefficient use of your time, and prone to errors. Rather than reporting to the tax office once a year, reporting will (at minimum) be quarterly and (at the other end of the scale) monthly. The increased level of reporting to the ATO means that terms like automation and streamlining will become more relevant, particularly to smaller businesses.
In even moderately-sized businesses, it is probable that end-users have developed their own computer systems. These might include Microsoft Access or Filemaker Pro databases, budget preparation spreadsheets or spreadsheets for management reports, that need to be changed for the GST. Considerable time needs to be spent (most likely by the end user who developed the system, who will need to know and understand the GST) incorporating the GST intelligence to ensure that decisions made by the system are correct. For example, a spreadsheet that evaluates quotes would need to be able to tell the difference between GST-inclusive quotes and GST-exclusive quotes for the provision of goods and services.
Organisations with an annual turnover of $20 million or more must remit monthly Business Activity Statements with the ATO. This must be enacted electronically (via the internet). Those with an annual turnover of less than $20 million per annum may elect to remit monthly or quarterly using traditional or electronic alternatives. The ATO is developing an e-commerce approach to enable electronic interactions between businesses and the ATO. Electronic interaction will require businesses to have internet access.
If you are not ready to implement the internet, your first step into cyberspace may be to gain internet access through your local library or through an internet ‘cafe’. This may provide a try-before-you-buy approach for those who are more sceptical. While it may first seem highly inconvenient to submit monthly returns using the internet, significant benefits in terms of convenience and cash flow may be realised once the system is implemented and automated.
It is important to remember that the GST is a whole-of-business issue. Merely installing a GST-compliant system is not the answer. The staff at the operational ‘coalface’ who use the system need to understand what they are doing, and there must be procedures and processes in place to properly capture and record the organisation’s input tax credits.
The aim is to retain customers and to continue to win business while effectively managing cash flow. There is less than three months before the introduction of the GST on 1 July 2000. The overall compliance of your business depends upon your system’s capacity to properly record and report the GST. Failure to comply is not an option.