Pocketing GST for profit??

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Brettus

I am currently self employed with a declared income of <$75K. I am not registered for GST.
I have a friend who is in exactly the same position, but tells me he adds GST to his invoices and pockets it for profit, even though he has not registered for GST. HE also says his accountant has said he can do this while he remains under $75K. This sounds like absolute BS to me. Anyone got any thoughts on this?
 
Brettus said:
I have a friend who .... tells me he adds GST to his invoices and pockets it for profit, even though he has not registered for GST.
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He cannot create an invoice that lists GST as an item or says 'total includes GST' etc. I suppose he could just inflate his prices by 10%

Brettus said:
HE also says his accountant has said he can do this while he remains under $75K.
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I seriously doubt that.

What your friend cannot do is claim any GST credits on stuff he buys for his business - so effectively he is paying 10% more for his business inputs.

Also your friend's customers cannot claim any GST credits on the invoices he sends out to them. This is not particularly attractive to a business that is registered for GST as they are effectively paying 10% more by dealing with your friend, than say another GST registered business.
 
I suggest you register for GST even though you're earning less than the threashold.

You business will run better in the long term if you start developing good habits now. It could be difficult to change your processes later when you get busier. You'll also find other businesses more easy to deal with.

Not registering for GST suggests you're not professional and thus a liability to others.
 
The GST threshold is on turnover, not profit.

If aren't registered for GST you CAN'T issue a "Tax Invoice". (Just tear a page out of an exercise book, it's no less professional) You can add 20% if you wish but the client wants to know the final cost. Without a tax invoice he/she can't offset 10% of the price against their own GST obligations.

Here it gets bit hazy with me but if you issue an invoice without an ABN the customer is obliged by the ATO to withhold some cash which you reclaim when you do your tax.

Companies, in general, have no interest in this and won't do business with you. They would assume you don't have public risk insurance too. Do you?

If you are just ripping off old folk as well as the government, I guess none of this matters.
 
Also your friend's customers cannot claim any GST credits on the invoices he sends out to them. This is not particularly attractive to a business that is registered for GST as they are effectively paying 10% more by dealing with your friend, than say another GST registered business
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I don't see how the businesses my friend deals with would know whether or not the GST on the invoice is legitimate, they would simply claim GST credits.

If aren't registered for GST you CAN'T issue a "Tax Invoice". (Just tear a page out of an exercise book, it's no less professional) You can add 20% if you wish but the client wants to know the final cost. Without a tax invoice he/she can't offset 10% of the price against their own GST obligations.

Here it gets bit hazy with me but if you issue an invoice without an ABN the customer is obliged by the ATO to withhold some cash which you reclaim when you do your tax.
Companies, in general, have no interest in this and won't do business with you. They would assume you don't have public risk insurance too. Do you?
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I am not registered for GST but I still raise a professional looking invoice with my ABN and I just list GST as zero. And yes I do have PLI.

At the end of the day it seems the only person getting ripped off is the ATO, it doesnt affect the businesses my friend deals with. Im sure it is the wrong thing to do, but he swares black and blue his accountant said he can do it. I will be calling my accountant shortly.

Cheers all
 
I don't see how the businesses my friend deals with would know whether or not the GST on the invoice is legitimate, they would simply claim GST credits.
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Simple: If no Tax Invoice has been issued it would be illegal. If a Tax Invoice WAS issued it is OK to claim the GST paid. But then your friend has committed fraud.

Why are you talking in public about committing fraud?
he swares black and blue his accountant said he can do it.
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Ask your friend who signs the tax return, he or his accountant? All the accountant signs is a disclaimer which puts the blame for errors etc onto him.
 
BTW If you or your friend is legitimately under the threshold and NOT issuing a Tax Invoice, nobody, not even the ATO is getting ripped off.

You are perfectly entitled to add any amount onto your bill you choose, just don't say it is GST, that's when it would become fraud.

I'm well below the threshold now but still pay my GST. Not because I'm a hero, just because it is simpler.
 
Brettus said:
*SNIP*
At the end of the day it seems the only person getting ripped off is the ATO, it doesnt affect the businesses my friend deals with. Im sure it is the wrong thing to do, but he swares black and blue his accountant said he can do it. I will be calling my accountant shortly.

Cheers all
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No, it is your buddies clients that are being ripped off.

He is telling them they have to pay a tax that they do not and is putting it in his pocket.

He's a thief..plain and simple.
 
Does it really matter?
Whatever the charge is, it's income.
He can't claim GST on expenses so he pays more tax on his more profit.

The amount on the invoice is irrelevant.
He is just making it easier for his customers by putting a gst amount on the invoice.
 
Piston Broke said:
Does it really matter?
Whatever the charge is, it's income.
He can't claim GST on expenses so he pays more tax on his more profit.

The amount on the invoice is irrelevant.
He is just making it easier for his customers by putting a gst amount on the invoice.
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Which is fraud.

His customers will be claiming GST credits for their GST input costs. They are allowed to do this on the presumption that their supplier will be remitting that GST to the government on his registered sale. He is not, he is pocketing it and falsely stating that he is registered for GST and allowed to claim GST on his sale which he in turn pays to the government.

There's no two ways about it, it is outright fraud.

Cheers,
Michael (GST registered and quarterly BAS returns)
 
Yes I agree that this is a very dodgy scheme. GST collected from a tax invoice is meant to be remitted to the government. No two ways about it. However, I'm not going to say that it's not uncommon for people to do this all the time...think of cash-only restaurants etc.
 
Brettus said:
At the end of the day it seems the only person getting ripped off is the ATO,
Cheers all
Click to expand...

Wrong.

The ATO collects tax on behalf of the government who uses the money for the running of the country including education, health and welfare.

The people being ripped off are all Australians, particularly those who can least afford it such as children, the aged and the disabled .
Marg
 
Thanks everyone, it seems this topic opens up quite a can of worms!

Someone suggested I shouldn't discuss fraud in public, I am merely asking a question which I am unsure about, I am sure it is legall to discuss crimes which have occured, they even have TV shows about crimes.

Anyways, just to reiterate, I do write legit tax invoices with a big zero for GST.
If my friend is actually pocketing GST that is stated on his tax invoice, he must have seriously misunderstood what his accountant said.
 
Well I think the guy is running a huge risk.

Unless he is audited by the ATO, which is always possible, then it is unlikely he will get caught but if he has a disgruntled customer who decides to take some sort of action he may be in for a nasty shock.

I believe the ATO would charge him with fraud and being a federal offence he would quite likely be sent to prison.

Definitely not worth the risk :eek:
 
We know most people think Landlords are crooks !!!!

I think we are very moral...now give us your friends name, so we can dob him in.:p
 
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