GST/Small Business, Bank Mergers

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New GST Accounting Methods for Small Retailers 
March 7, 2000
National Accounts, Budget, Victorian Liberal Party
March 15, 2000
New GST Accounting Methods for Small Retailers 
March 7, 2000
National Accounts, Budget, Victorian Liberal Party
March 15, 2000

GST/Small Business, Bank Mergers


Transcript No. 2000/24


The Hon Peter Costello MP



Commissioner of Taxation

Launch of Simplified Accounting Methods for Small Business

Wednesday, 8 March 2000

12.00 pm

SUBJECTS: GST/Small Business, Bank Mergers


When the Government was forced to amend its legislation for Goods and Services Tax in

the Senate, and make food GST-free, as all exemptions do, it led to an increase in

complexity, because it would require people in the food industry to distinguish between

food that was GST-free and other products which were not GST-free. And since that time the

Government has been working overtime to try and introduce a system which would take the

compliance cost off the food sector which was forced upon it by those amendments in the


Today, I’m very pleased to be able to announce that the Government will be

introducing a simplified accounting method which will ease the compliance burden for

people in the food industry considerably. This simplified accounting method has been put

together with the assistance of industry representatives, many of whom are here today, and

with the work of the Commissioner and the Australian Taxation Office. Essentially what it

does, is that it introduces three simplified systems which businesses in the food sector

can take advantage of: a business norms method; a snapshot method; or a stock purchase

method. And as an example, what it would allow you to do under the business norms method,

if you happen to be in a hot bread shop, rather than have to distinguish between your

sales which are GST-free and those which are not you can apply a business norm at 50 per

cent. Meaning that 50 per cent of your sales will be considered to attract a GST and 50

per cent not, rather than having to identify each sale separately and apply GST to some

and not to others, you can adopt the business norm. And when you come to make your

quarterly return you would just apply GST on the quarterly return to 50 per cent of your

sales. If that is not the most economic way of doing your return you could alternatively

choose the Snapshot Method or a Stock Purchases Method, and it would be at the election of

the person concerned if they qualified under this system. The simplified accounting method

for food retailers will ease compliance burdens in the food industry substantially. It

will be of benefit to small business in particular. It’s been developed by the

Australian Taxation Office with the encouragement of the Government and industry

consultation. It is part of ensuring that compliance costs are kept to a minimum. And it

is also, we believe, one of the most innovative ways in the world of dealing with this


Australia is not alone in introducing GST or value-added tax, there are 150 countries

in the world that have done it, and in most of those companies, you have some kind of

lower rate or exemption for food. We’ve looked around the world, we’ve adopted

what we believe to be international best practice. It’s designed to help the small

business sector in food retailing, and I think it will be of enormous benefit for

compliance and keeping compliance costs down.

I’ll now invite the Commissioner of Taxation to come and address the issues.


Thank you Treasurer. And as was pointed out we are releasing today the simplified

accounting method for small business food retailers that should make life a lot simpler

and much more certain for them as they move to implement the GST. What it means for small

business is that your typical convenience store, local mixed business, milk bar,

delicatessen, will now have much easier ways of distinguishing between, for example, their

savoury filled bread rolls and their bread rolls, their candied peel and their

confectionary. The simplified accounting systems that we’ve developed have been done

in close consultation with industry representatives, and they’ve certainly given the

thumbs up to us on the value of these approaches.

To take an example, as illustrated by the Treasurer, under one method determining your

GST-free sales will be as simple as taking your takings for the period and multiplying by

a factor that we will give that particular type of store. We have released in a range of

fact sheets the first of these industry norm factors. They cover, for example, hot bread

shops, convenience stores, mixed businesses, milk bars. More will be on the way. So that

if you take, as was illustrated, a typical convenience store that doesn’t sell petrol

and other things, then to work out their GST-free sales, instead of counting day by day

how many candied peel products they sold as distinct from cartons of milk, then all they

need to do is have their takings for the period and multiply by 30 per cent. Similarly to

work out their GST-free purchases – their purchases for the period multiplied by the

industry norm, in that case 30 per cent. We also realise that these are averages of

GST-free sales for the particular types of stores that we’re covering in these, so we

are allowing these small businesses to personalise the percentage that they use to

determine their GST-free sales and purchases. There are two methods for this. The first is

called the snapshot method, and all that requires is that the business take two two-weekly

periods in which they keep a record of their GST-free sales, and that provides them with

the percentage or proportion of their sales that they then apply to their takings

throughout the year. Similarly for their purchases. For those retailers who merely re-sell

goods, that is they don’t convert, they don’t produce sandwiches and so on from

it, there is a further simple option available to them to, again, personalise it for their

store. And what that requires simply is that they take the two four-week periods, an

analysis of their purchases to determine during that period the percentage of their

purchases that are GST-free. And that provides them with the percentage they then apply to

their sales as re-sellers to determine their GST-free sales. Eligibility for these

simplified accounting methods are essentially for businesses with a turnover, mixed

businesses with a turnover of up to $1 million and for businesses who do not have the sort

of sophisticated point of sale equipment that automatically accounts for and identifies

particular products. In addition, as a special transtitional measure for one year only,

for businesses with the sales of $1 million and up to $2 million, we will allow the stock

purchases and the snapshot method employed by them as a transitional period for one year

to ease them in to the New Tax System. Copies of these booklets and these fact sheets will

be available by ringing our infoline on 13 24 78. And over the next few weeks we’ll

be translating those into over eight languages, reflecting the diversity of people who

operate these small stores. I believe that with these initiatives, GST for small business

retailers has now become much simpler and much more certain. I think we will leave it at

that and open up the questions.


Thank you. Right, are there any questions?


Yes, the two-weekly exposure seems a hell of a snapshot.


It’s the difference between two two-weekly periods of accounting for these and 52

weeks of accounting for these. I would have thought that’s a fairly reasonable

approach. And remember they also have the option if they think that that’s onerous,

and certainly I don’t, they also have the option of simply looking at their purchases

where invoices will contain details of what’s GST-free or not.


Or of using the business norms method?


Absolutely. There’s an option here for everyone.


Isn’t there a choice of moving between the three systems.


Once you elect a particular system, you apply that for a 12 month period.


Mr Carmody . . .


We’re not looking for cherry picking of options.


Mr Carmody, with the business norms, you talk about five that are on the way. When do

we expect to see those percentages and perhaps why aren’t they ready now?


Well first of all we have, they are already ready for hot bread shops, they’re

already ready for convenience stores, mixed businesses and milk bars that are there. We

wanted to get out into the public arena, the fact that these methods were going to become

available at the earliest time possible so that businesses under $1 million don’t

feel some of the pressure, some undue pressure, that they’ve been feeling from some

retailers of fairly expensive point of sale equipment. So our objective was to establish a

methodology, get the rules out for everybody, get the first of these out and we are now

working with other industries to get them out at the earliest possible time.


Well, when there’s five listed on page 11, cake shops down to delicatessens, when

do we expect we might see those?


They’ll come out progressively over the next few weeks.


(inaudible) to make sure (inaudible) match up to reality?


Well, these have already been developed by talking with industry groups and actually

going out into some of these stores to get representative samples. So we’re

confident, and certainly industry shares this with us, that they are an appropriate

reflection. Of course, we’ll review them after a years experience.


Commissioner, if business doesn’t have access to the internet isn’t there a

problem getting the booklet because your hotline is advising people today that it’s a

3 to 6 week wait for the booklet. And they’re saying . . .


Well, let me give you the authoritative advice, I don’t know who you’ve been

talking to …


I rang your number.


… but as of Friday we have, they’re printing now, and over 50,000, the first

issue of 50,000 will be available on Friday. And it’s then just a matter of turning

them around in the mail.


Alright . . .


Treasurer, are bank mergers inevitable and or desirable?


Let me make a couple of points. The first point is that there’s been a lot of

speculation in today’s press that the Commonwealth Bank will be merging with

Colonial. As I understand it, no official statement to that effect has been made. The

shares, the trading shares have been suspended for both companies, and I would expect the

companies concerned to make a statement when they’re ready. It may not be today, it

may be sometime off. When the statement is made, they would, I imagine, set down the terms

and conditions, the prices, the method in which it would be accomplished, and it would be

subject to various approvals. Firstly it would be subject to the Treasurer’s

approval, which needs to be done if the merger or the takeover is in the national

interest. Secondly, it would be conditional upon approval from the Australian Prudential

Regulatory Authority which needs to be satisfied that all prudential standards have been

met, depositors funds are safe and so on. And I can’t imagine that there’d be a

problem with that. Thirdly, it would be subject to the approval of the Australian

Competition Commission, which would need to be satisfied as to the competitive aspects of

the arrangements. And the approvals given by the Australian Competition Commission can

have conditions where the merged entity would get a uncompetitve market share, that is too

great a market share in a particular market, it can order divestment accordingly. Now,

since there’s been no annoucement yet made, I can’t speculate on the terms and

conditions that would be attached. But I would expect, if an annoucement is made, that the

banks will be indicating what they intend to do with branches, with employment and with

services. And I will look at that statement very carefully when it’s made in

exercising my discretion, and I imagine the other regulators will look at the statement

when it’s made in exercising their discretion.


Treasurer have you met with either the Commonwealth or Colonial Bank, or have you been

briefed by them?


I had a meeting with executives of both banks yesterday.


Treasurer, the Prime Minister made a undertaking to rural and regional Australia that

services wouldn’t decline any further there. When you look at this merger, will you

be using that as a benchmark to whether you give it approval or not?


The Prime Minister’s commitment is that services will not be withdrawn, and as I

understand it, it’s that Government services will not be withdrawn. Having said that,

the Government wants to keep private sector services up in the bush and indeed is

encouraging new private sector services into the bush, particularly with

telecommunications reform. What I’ll be doing when it comes to me is, I’ll then

be exercising my power according to the statute, which is looking at, if this is in the

national interest. And that’s a very broad test, and it involves looking at all

manner of things, including whether it will get better services to customers, what it will

do for competition in the market, what it will do in international terms for creating

strong financial institutions, what it will do for the structure of the Australian finance

industry. And it’s a very broad test, and I’ll be exercising my discretion in

relation to all of those matters.


What about job losses? Is that something you’ll also consider (inaudible)?


I’ll be very interested to see what the banks say about employment. As I said,

when these announcements are made they generally give an indication as to how the merger

is going to be accomplished and what will happen in relation to jobs. Now, we don’t

yet know, we don’t even yet know, do we, that this has been agreed, because no

statement has been made. We certainly do not yet know what they intend to do in relation

to branches and employment. And only the banks themselves can tell you that. Only the

banks themselves can tell you that, so we will have a look at the statement when it comes



Didn’t you have a meeting with them, didn’t they tell you?


As I said, I had meetings with the Chief Executives, but no statement has been made and

it’s the institutions concerned if they make the statement that will be presumably

disclosing their terms and their conditions.


If such a merger goes ahead, isn’t this going to place a lot more pressure on the

Government to wind back Four Pillars?


No, this is not inconsistent with the Four Pillars policy. The Four Pillars policy is

that none of the large four banks, that is, Commonwealth, Westpac, ANZ, National

Australia, in the current circumstances will be allowed to merge. That is, that we ensure

we have four strong commercial and retail banks in the Australian market competing with

each other. Now, I actually think some of the competition has been very fierce, and this

is what’s driving some of these acquisition strategies. But for a bank to merge or

make an offer on one of the smaller banks is not in breach of the Government’s

policy. It is consistent with the Government’s policy on Four Pillars and it will be

handled in accordance with the tests, as I said, the national interest, prudential and

competition. And we’ve got to make sure that we have competition in our markets to

give benefits to consumers, and also we’ve got to an eye to the structure of the

Australian financial industry taking on the world. And in world terms, some of the

Australian banks want to get into international business, which from a national

perspective is quite important. There are some Australian banks that now derive a large

part of their income and earnings offshore, and they bring that income and earnings back

into the Australian taxation system. That provides revenue for domestic services in this

country and that is good for Australian taxpayers, that they’re getting those sorts

of earnings into the tax system. It’s another fact that we’ll keep in mind in

all this.

Thank you very much for your time.