Business

Time for business to plan for GST

Consumers might end up paying
‘most of the new GST. But business
people, professionals and even
some investors face a taxing time,
too.

For example, some goods and
services are classified ‘‘tax
exempt.” That’s great news for the
consumer, who won’t have to pay
the goods and services tax on
those items. But it’s terrible news
for the business person supplying
lax exempt goods and services.

Here’s why. If you can charge
GST on the items you sell, you can
get a refund of the GST you pay on
the items you buy to run your
business. But if you sell tax
exempt items, then you are stuck
with the GST you pay:

“That’s why it’s so critical to
begin now to plan your pricing and
margins for 1991,” said Andrew
Ellis, partner of Walsh King, char-
tered accountants.

I attended a GST seminar pre-
sented -by Walsh King. The 60-
page binder delegates received
could only highlight how GST is
going to affect the lives of busi-
hess people and many investors.

“This is simply an introduction
to what lies ahead and the plan-
ning that must be done over the
next six months,” said Ron Walsh,
the company’s founding partner.

IT asked Ellis to list the six key
steps all business people should
take to prepare effectively for GST.
You might like to clip and save
these guidelines.

— Register with Revenue Can-
ada, Excise. This will start the
flow of information you will need
to operate within the GST system.

“You can also then start to plan
changes to your invoices and other
Stationery,” Ellis said. (if your
business sales in the last 12
months were under $30,000, regis-
tration for GST is optional.)

— Identify which of your sales
will be taxable, zero rated or
exempt. (“Zero rated” means you
will not charge GST but you will

Woman injured

A 66-year-old Sidney woman
was taken to hospital with injuries
when she was struck down in the
parking lot of a local apartment
building.

Sidney RCMP said it appears a
vehicle’s gearshift slipped into
reverse when Mary Gibson of
second Street left the vehicle,
about 2 p.m. Thursday. She was
taken to Saanich Peninsula Hospi-
tal.

6529515

recover the GST you pay on items
your business buys.)

— Review all your contracts for
GST implications and plan the
necessary changes.

— Review your bookkeeping,
accounting and point-of-sale sys-
tems. ““You must track the GST
you collect on sales and pay on
purchases to make sure you get
your full credits,’’ said
Ellis.““Careless record-keeping

could really cost you money.”

— Plan any necessary margin
and pricing changes.

— Draw up an implementation
schedule so everything is in place
before next January 1. For exam-
ple, you will need an accurate
inventory count at December 31 to

*“You must track the
GST you collect on
sales and pay on
purchases to make
sure you ge? your full
credifs,’’ said Ellis.’

collect the full federal sales tax
rebate to which you are entitled.

For further help with these six
steps, Ellis suggested contacting
professional and trade associa-
tions, Revenue Canada and your
accountant.

If you don’t enter the GST world
with all systems operating prop-
erly, watch out.

Revenue Canada will charge a
penalty of six per cent a year plus
interest (compounded daily) on
the GST not remitted.

That could be very costly if the
shortfall is discovered several
years after it occurs. Penalty and
interest will not be deductible.

Many investors need to learn
about GST as well. “The area of

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real estate is one of the most
complex,” said Michael Byrne,
tax consultant with Walsh King,

For example, if you buy a new
apartment building, you will pay
the GST.

However, you will not be able to
charge GST on the residential
rents, SO you Cannot recover any
GST you pay — either the original
tax on the purchase of the building
Or any taxes on subsequent goods
and services you buy to run the
building.

If you buy commercial or indus-
trial property, you will pay the
GST. But because you will also
collect the GST on the rent you
charge, you will be able to recover
all the GST you pay.

If you are entitled to claim
“input tax credits” (for the GST
paid on goods and services your
business buys), “you may apply
for those credits once you have
been invoiced — even if you
haven’t actually paid the tax yet,”

Byme said. “That can make quite

a difference to your cash flow.”

Invoices must contain increas-
ing amounts of information — up
to nine items — once purchases
exceed $30 and again when they
exceed $150. If the invoice is
incomplete, your business won’t
be able to claim the input tax
credit (that is, the refund of the tax
you paid).

Mike Grenby is a Vancouver-
based columnist and independent
personal financial adviser; he
will answer your questions as
space allows in his column —
write to him c/o The Review, Box
2070, Sidney, B.C. V8L 3C5.

Is your

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Quotes from ‘Chairman’ Zalm offered in red book

The NDP is flogging an updatea
edition of a “Little Red Book”
containing a collection of quotes
from Chairman Zalm.° Here are a
few sample quotes: ~ You can’t go
too far wrong if you believe what
you're doing is right . . . A lot of
17-year-olds are still in school and
all they can think about is beer,
smokes and girls. They probably
would be better off somewhere out

there learning a trade.”

“I'm not sure Canadians are all
that concerned by what is traded
away in culture. Canadians are
already pretty influenced by
American culture, and they don’t
seem tO mind it too much. I don’t
think there’s much wrong with the
marketplace determining what
people want in culture.”

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