Goods and Services Tax - Australia

Goods and Services Tax- Australia

To uphold a country's political and economical stability, governments often implement policies. There are many different types of policies that a government would implement to stabilize their country. However, one significant policy that almost every country uses is tax. In particular, Australia and Canada use a value added tax known as the Goods and Services Tax (GST). Australia's GST policy was introduced by the Howard government and went into effect on July 1st, 2000. This GST policy replaced the wholesale sales tax system and other various minor taxes like that of stamp duty and bank account debits tax. In other words, the "goods and services tax is a broad-based tax of 10% on most goods, services and other items sold or consumed in Australia." (http://www.ato.gov.au/) The GST policy affects more than just people in Australia, it affects the economy of the country. Thus, the Australian government had probably implemented this tax for a number of reasons, and a number of benefits. GST impacts a great deal in Australia as GST is placed on all the imports to Australia along with the tax imposed on practically all aspects of the production and distribution of the goods and services. To briefly explain the GST will enable the understanding of the impacts, effects and the reason of its implementation to Australia.

As an overview, when the GST is imposed upon the goods and services, it is then known as 'taxable supplies'. These goods and services will be all of the goods and services that have been imported. Furthermore, this tax is charged at all stages of its production and distribution process. However, it must be known that there are some goods and services that are exempt from being taxed by the GST. This list of exemption goods differ from country to country who implement the GST tax. For example, in Singapore, the exempted items will include the following of financial services, or the selling and the leasing of residential properties. In Australia however, the GST will include vehicles for the disabled people, basic food and specific medical aids and appliances. Within Australia, almost all the small business are affected by the GST policy because businesses that have an annual turnover of $50000 or more, or in the case of non profit organizations, $100000 or more have to register to pay the GST. Besides small business, those that provided transportation travel like taxis as a part of their present business will also need to register for the GST, regardless of turnover. After one registers for the GST, the one registered will be able to claim input tax credits. The process to register is quite efficient and simple as the registering will only take a completion of an application in which the application used to register for an Australian Business Number will allow the registering candidate to have it as their GST registration number. After this, the business, or those who have registered for the GST will be subject under paying for the services and goods that are imported. However, one can not assume that this GST affects only the small businesses or whomever that by law are required to register for the GST. The GST in fact, affects quite a bit of different people within the country.

To start off, the consumers, or rather the majority of the citizens of a country will usually be affected by any type of policy imposed in their country. Therefore, once this GST tax was imposed, a lot of different perceptions were formed by the Australians. To many people, both consumers and critics, the GST may be incredibly similar to a regressive tax that will have already been imposed within ones country. This is because a regressive tax usually affects the lower income earners because a larger portion of their income is taken as opposed to a smaller portion of the income of wealthier ones are taken. The federal treasurer of Australia, Peter Costello has claimed that the people were not paying for extra tax because there are a number of other taxes like personal income tax, state stamp duties etc. that help reduce the total tax amount being paid by lower income earners to the country. As the tax affects different types of goods and services that are being imported into a country, this created some problems for Australia. Right before the tax was imposed in Australia, many consumers rushed out to purchase goods that they thought would become increasingly expensive after GST was taken into effect. This resulted in an immense drop of consumer consumption which led to economic growth. In this case, the GST has both negatively changed the economic growth of the country as well as the change of buying trends within Australia. Small business owners were furious because their costs escalated with them having to pay 1/11th of their revenue for GST purposes. In addition, the small businesses had to submit all their Business Activity Statements to the Australian Taxation Office on a regular basis. Aside from just affecting small business, the GST affected the real estate industry in the beginning when it increased cost and cut demand. This was only during the early period when GST was first introduced. A couple of years later, both the property and the demand for the properties increased substantially. The main objective of this GST policy is to help local business to compete more effectively with the import products and help people become more careful with the money they would spend on some unnecessary goods. This helps local business because they can charge the valued of the added tax (GST) into the pricing of goods and services that they produce to the customers. So local business then wouldn't have to bear the cost of the added tax but put it for a buyer instead. All imports products into Australia must be cleared by customs whether arriving by any transportation. This includes the value the value of the good imported, the international transport cost and the insurance cost, so the cost of import good are high therefore people would then stop import and help local business in a way. The other objective of this policy is that it forces people to be more careful with the money that they spend. The GST has not only affected those living inside Australia, as the discounts of duty free shopping have also been altered. The import duties that results into the discounts for those doing duty free shopping were removed, so the process for tax savings claims were changed. Before, as long as a presentation of airline tickets and a passport will allow goods to be purchased under offerings of duty free pricing, and the goods will remain sealed until these goods were passed through customs at the Australian airport. Following the GST, a receipt for the goods that were purchased is no needed, along with a total needed of over AUD$300 for eligibility