How the proposed GST will impact ALIA members - Arthur Andersen report

Cashflow issues

The reform package indicates that GST would be remitted on a monthly basis by businesses with an annual turnover of $20 million or more. Those businesses with turnovers under that amount will remit quarterly. In addition, GST will be calculated by large business on an accruals basis (ie usually when an invoice is issued).

Remittance of GST on a quarterly basis would be of additional benefit to a business. This inherent benefit would exist in being able to hold the GST collected on behalf of the government for a period of up to 15 weeks thus allowing interest to be earned on such collections.

Systems issues

It will be necessary for libraries to implement new systems to charge and collect GST on certain commercial services, and to also offset the input credits to which the library is entitled. In addition, we anticipate that a system for electronic lodgement of GST returns will be required.

It is generally the sole responsibility of the business itself to track and claim all the input credits to which it is entitled, including the appropriate apportionments. Therefore it is important that a system is implemented which is able to capture the full extent of GST input credits available to the business. These systems would, at some point in time, also be tested for accuracy by the ATO.

There can be a very substantial cost in establishing and maintaining such systems.

Specific questions addressed

You have requested that we address several specific questions. Where these have been answered in the body of the report, we will refer you to the specific section.

Will public libraries which have been corporatised be treated in the same way as libraries run directly by the council?
Refer to the section headed 'Non-corporatised libraries' and 'Corporatised libraries.' In summary, there will be no net difference in the treatment of corporatised and non-corporatised libraries. Refer to the example scenarios in the previous section to this report.

Will GST-free status apply only to that proportion of revenues raised through rates, or will it apply to all forms of expenditure derived from revenues secured through fines, investments, sale of land and buildings and the like?
Only the non-commercial activities of the local councils will be GST-free.

If libraries are GST-free, what will the cost of administering the accounting procedures necessary to claim the rebates?
Once the systems are established, the ongoing management should not be onerous. It will be critical, however, that all input tax credits are captured. To the extent they are not, there will be a net GST cost to the library.

How will accounting measures impact on cashflow (i.e. the period between paying the GST and reclaiming the charges?)
Cashflows will be impacted by the timing differences, and management diligence will be required to minimise the impact.

Will outsourced services be GST-free?
The library/council will be charged GST on all outsourced services. However, this should be matched by an equal input credit arising to the library/council for the GST component of the invoice for the service.