16 - Wednesday, June 27, 1990 - North Shore News Follow the six key steps to GST planning 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 ex- empt.’* 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 f-: the business person supplying “as .sempt goods and services. ‘-are’s why. If you can charge GaT on the iiems 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 dollars and sense Michael Grenby 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 An- drew Ellis, partner of Waish King, chartered accountants. 1 attended a GST seminar pres- ented by Walsh King. The 60-page binder delegates received could only highlight how GST is going to affect the lives of business 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. { 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. (t) Register with Revenue Canada, 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. (HW your business sales in the last 132 months were under $30,000, regis- tration for GST is optional). (2) Identify which of your sales will be taxable, zero rated of ex- empt. (‘Zero rated’? means you will not charge GST but you will recover the GST you pay on items your business buys). (3) Review all your contracts for GST implications and plan the necessary changes. ove. (4) Review your bookkeeping, accounting and point-of-sale systems. ‘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." (S) Plan any necessary margin and pricing changes. (6) Draw up an implementation schedule so everything is in place before next January 1, For exam- ple, you will need an accurate in- ventory count at Dec. 31 to 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 properly, watch out. Revenue Canada will charge a penalty of six per cent a year ptus 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 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 res- idential rents, so you cannot re- cover 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 in- dustrial 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,"’ Byrne said. *‘That can make quite a difference to your cash flow."” invoices must contain increasing amounts of information — up to nine items — once purchases ex- ceed $30 and again when they ex- ceed $150. If the invoice is in- complete, your business won't be able to claim the input can 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 columa — write to him c/o North Shore News, 1139 Loasdale, North Vancouver V7Ni 2H4. a) | y+ Scott and Chris Ca Carle Gage Susie Dickson Tyler Blair A. Marandi Tony Grant Chand Duilu Margo Ross P. Johannes John Speck Jared Hupalo K. Malialis G. 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