Business needs to be preparing now to ensure that it - and its staff - understand the implications of the Goods and Service Tax, Australian Competition and Consumer Commission Chairman, Professor Allan Fels, has warned.
"Recent consumer calls to the ACCC Hotline [1300 302 502] about GST-inclusive pricing in contracts highlight the need for businesses to implement compliance programs.
"Consumers are asking why businesses are charging GST on everyday contracts like insurance, club memberships, pre-paid funerals, concert tickets, movie tickets, theatre tickets and also airline tickets.
"When consumers ring the company for an explanation of why some GST is included in the contract price, call centre staff are often unable to correctly explain why GST is included and, importantly, how it is calculated.
"From 1 July 2000 GST will be payable on most goods and services. For any supplies that are made before 1 July 2000, there is no obligation on the supplier to remit GST.
"The legislation does not prevent businesses from adjusting prices to reflect the New Tax System changes when they occur. However, it seeks to prevent over-recovery of tax changes either from raising prices too high or not reducing them enough.
"If a business collects GST up-front and holds it for longer than the 'tax period', the amount of GST collected should be offset by any interest earned".
The ACCC's Hotline staff has been inundated with complaints about insurance premiums that include the GST.
The ACCC investigated complaints about FAI General Insurance Company Ltd attributing certain premium increases to the GST, even though the insurance contracts expired before the introduction of the New Tax System. To rectify this situation FAI agreed to write to all affected policy holders offering a full rebate of the amount incorrectly attributed to the GST.
"Although the ACCC is encouraged that some insurance companies are beginning to include GST brochures in premium renewal notices to their customers, staff training about the GST and the New Tax System is also needed to underpin consumer confidence and minimise complaints.
"Many businesses now recognise the 'bottom line' benefits of actively pursuing trade practices compliance programs. An ethical corporate image can hold substantial commercial benefits in the marketplace and strengthen brand image and recognition".
Consumer complaints have not been limited to the insurance industry and other sectors with long-term contracts spanning 1 July 2000. Recently, the Hoyts cinema chain increased the price of certain multi movie passes by $5. When consumers asked certain box office staff about the rise they were told that it was due to the GST.
An ACCC investigation has resulted in Hoyts agreeing to offer a $5 refund to consumers who were misled and erecting prominent point of sale notices alerting consumers to this offer.
Hoyts also agreed to review internal procedures to ensure that management and staff are made aware of trade practices compliance obligations.
"The ACCC recognises that problems will arise and acknowledges Hoyt's full cooperation that enabled a speedy resolution to the matter. However, businesses should recognise that there are 19 million consumers who have joined forces with the ACCC in a bid to rein in those unwilling to properly address GST compliance issues.
"The Hoyts case serves as a timely reminder that businesses should have an effective trade practices compliance program in place to ensure that staff are able to properly explain GST-inclusive pricing. This will minimise the risk of breaching the law by misleading consumers.
"With the imminent introduction of the New Tax System, more than ever, consumers will be looking to purchase goods and services from companies they can trust.
"Recent consumer calls to the ACCC Hotline [1300 302 502] about GST-inclusive pricing in contracts highlight the need for businesses to implement compliance programs.
"Consumers are asking why businesses are charging GST on everyday contracts like insurance, club memberships, pre-paid funerals, concert tickets, movie tickets, theatre tickets and also airline tickets.
"When consumers ring the company for an explanation of why some GST is included in the contract price, call centre staff are often unable to correctly explain why GST is included and, importantly, how it is calculated.
"From 1 July 2000 GST will be payable on most goods and services. For any supplies that are made before 1 July 2000, there is no obligation on the supplier to remit GST.
"The legislation does not prevent businesses from adjusting prices to reflect the New Tax System changes when they occur. However, it seeks to prevent over-recovery of tax changes either from raising prices too high or not reducing them enough.
"If a business collects GST up-front and holds it for longer than the 'tax period', the amount of GST collected should be offset by any interest earned".
The ACCC's Hotline staff has been inundated with complaints about insurance premiums that include the GST.
The ACCC investigated complaints about FAI General Insurance Company Ltd attributing certain premium increases to the GST, even though the insurance contracts expired before the introduction of the New Tax System. To rectify this situation FAI agreed to write to all affected policy holders offering a full rebate of the amount incorrectly attributed to the GST.
"Although the ACCC is encouraged that some insurance companies are beginning to include GST brochures in premium renewal notices to their customers, staff training about the GST and the New Tax System is also needed to underpin consumer confidence and minimise complaints.
"Many businesses now recognise the 'bottom line' benefits of actively pursuing trade practices compliance programs. An ethical corporate image can hold substantial commercial benefits in the marketplace and strengthen brand image and recognition".
Consumer complaints have not been limited to the insurance industry and other sectors with long-term contracts spanning 1 July 2000. Recently, the Hoyts cinema chain increased the price of certain multi movie passes by $5. When consumers asked certain box office staff about the rise they were told that it was due to the GST.
An ACCC investigation has resulted in Hoyts agreeing to offer a $5 refund to consumers who were misled and erecting prominent point of sale notices alerting consumers to this offer.
Hoyts also agreed to review internal procedures to ensure that management and staff are made aware of trade practices compliance obligations.
"The ACCC recognises that problems will arise and acknowledges Hoyt's full cooperation that enabled a speedy resolution to the matter. However, businesses should recognise that there are 19 million consumers who have joined forces with the ACCC in a bid to rein in those unwilling to properly address GST compliance issues.
"The Hoyts case serves as a timely reminder that businesses should have an effective trade practices compliance program in place to ensure that staff are able to properly explain GST-inclusive pricing. This will minimise the risk of breaching the law by misleading consumers.
"With the imminent introduction of the New Tax System, more than ever, consumers will be looking to purchase goods and services from companies they can trust.