[

- Business

|” Claiming the cost of the GST

| a

ry

It’s time to take another look at
the Goods and Services Tax —
with an eye to saving and making
as much money as possible
whether you are employed, self-
employed or don’t work outside
the home.

Evelyn Jacks, author of Jacks
on GST (McGraw-Hill, $8.95),
says consumers can’t avoid the
GST, short of buying fewer goods
and services.

“So concentrate on lowering
your (family) net income as much
as possible to enable you to claim
some or all of the GST credit —
which can run as high as several
hundred dollars a year,” said the
Winnipeg-based Jacks, who man-
ages Canada’s largest correspond-
ence tax school and education,
policies and procedures for the
120 branches of U & R Tax
Services.

Even if family net income is
more than around $25,000, you
should still qualify for some of the
GST credit.

‘Concentrate on
lowering your (family)
nef income as much
as possible.to enable
you fo claim some or
all of the GST credif’

“To help reduce that net income
figure which appears on line 236
of your tax return, make sure you
claim every possible deduction,”
said Jacks.

Look for, among others, maxi-
mum RRSP contributions, safe
deposit box rental, interest paid to
buy Canada Savings Bonds on the
payroll plan, all eligible moving
expenses, child care expenses
(which can include, within limits,
summer camp costs) and so on.

If you are an employee who can
claim travel, promotion, office-in-
the-home and other expenses, “be
sure to keep track of all receipts
and show the GST you pay,” Jacks
said.

“Starting with this 1991 tax
year, you will be able to file a
separate GST rebate form when
you do your tax return at the

_ beginning of 1992.” That will pay

off because a full rebate of the
GST is worth more than a deduc-
tion.

For example, let’s say you pay
$321, which includes $21 GST,
and you are in the 45-per-cent tax
bracket.

...1f So; we can
custom print
your own copies

taken by The
li Review staff.

If you simply deduct the $321,
you will reduce your tax by
$144.45 (45 per cent of $321). But
if you claim your GST rebate, your

total tax savings will be $156
(rebate of $21, plus 45 per cent of
$300).

Jacks said consultants, free-
lancers and people who run a
small business out of their homes
appear to be having the most
trouble with the GST.

“If your self-employment
income is less than $30,000, you
don’t have to register for the
GST,” she said. “But that means
you are not allowed to claim input
tax credits — rebates — for the
GST you pay on your business
expenses.

“Because you can’t recover this
extra cost, you probably have to
raise your prices, which your cus-
tomers may not like.”

The reason? Most businesses
charge GST on the goods and
services they sell. So they claim an
input tax credit for the GST paid
on goods and services they buy
from consultants and other sup-
pliers.

But if the suppliers don’t charge
the GST and simply raise prices,

the businesses end up with a
deduction rather than a combina-
tion of deduction and tax credit —
as in the previous example.

Let's say you charge Company
A $1,000 for the work you do. If
you are registered to collect GST,
you can claim an input tax credit
for the GST you pay on your
business expenses. You also add
$70 GST to your $1,000 bill.
Company A can then get the $70
back by claiming an input tax
credit.

But if you are not registered
under GST, you cannot claim an
input tax credit for the GST you
pay on your business expenses. So
you Taise your $1,000 price by $70
to compensate you for your GST-
expenses. In this case, because the
extra $70 is a price increase rather
than a GST increase, Company A
cannot claim back the $70 as an
input tax credit.

So Company A (if it’s in the
45-per-cent tax bracket) ends up
with only a $31.50 tax reduction
instead of a $70 tax rebate. If
Company A is a family business,
in the 23-per-cent tax bracket, the
tax reduction is only $16.10 —
instead of $70.

Even if your self-employment
income is below the $30,000
threshold which requires GST reg-
istration, it could still make sense
for you to register — not only so
you can claim input tax credits for
the GST you pay on your business
expenses but also so your custom-
ers can claim full credits rather
than the smaller tax breaks pro-
vided by deductions.

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,
9726-First St., Sidney, B.C. V8L
3C9.

MOORE ROBERTS & CO.

Chartered Accountants

Atcounting and Auditing Services
Income Tax Preparation and Planning
Business and Computer Consulting

FAX LINE 656-2382
200 - 2377 Bevan Ave., Sidney
Postal Code V8L 4M9

656-5547

TheReview

Wednesday, April 17,1991 — A25

STRAIGHT TALK |
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