Theres a Fraction......

The speculation is over. The rate of GST will be increased from 12.5% to 15% as of 1 October 2010.

The GST rate increase is consistent with Government’s commitment to a fairer tax system and a move away from personal and company tax rates that it considers harmful to economic growth.

Over the next three months (and beyond) we’ll be working hard to guide our clients through the various changes that need to be implemented as a result of the GST rate increase, some of them complex.

As always, taxation changes do present opportunities along with the usual challenges, so now is the time to consider those opportunities along with the raft of administrative changes you’ll need to consider.

Here is a tip for now, more on the way in the future.

New Tax Fraction
At the moment, with a GST rate of 12.5%, calculating the GST component of a GST inclusive price is as simple as dividing by 9.

Not so simple after 1 October. When GST increases to 15% you’ll need to multiply by 3 then divide by 23.

For example: Let’s assume the price of an item is $1,000 plus GST, so that’s $1,150 including GST. The GST component is $1,150 x 3 ÷ 23 = $150.