Plant pricing and
the GST for growers
ISSUE
NUMBER:
2000/06
Growers are primary producers and so few of your costs will change overnight on the 30th June.The
GST must be charged on all sales of plants made by growers unless you have total business sales
under $50,000 (see Warning for small growers). Regardless of how you price the product any registered business you sell it to can claim one eleventh of the cost back as GST paid on their input costs.
So if you don't adjust your prices as of 30th June you are effectively giving your customers a 9.1%
discount!
You are expected to pass on any savings in input
costs resulting from the new tax system. Remember that if you have registered for the GST any tax
paid on input costs is claimed back. Also in time
costs like freight, heating and vehicle operation
are predicted to fall and you should pass on these
savings. Your accounting systems will have to be
good to keep track of the GST and so it shouldn't be too hard to identify any savings in costs as
a result of the new system.
Protect your profit by adjusting prices
Many of the input costs on the stock you have for
sale on 1st July 2000 , such as labour, potting
media and pots were incurred months and even
years ago. So for many growers the new pricing
for stock is a simple matter. If after examining the
impact of the new tax system on the costs
incurred in growing that stock you conclude the
impact is nil (you may have to prove this) then
your prices should go up by 10%.
The government and ACCC have said that
you shouldn't profit from the introduction of the
GST but you can price in order to protect your
pre-GST profit levels. If the impact of the new tax
system on your current costs is nil and you
don't put prices up by 10% you'll be losing
profit big-time….
Thoughts about pricing post 30th
June 2000
If you are going to introduce any new plant lines
after 30th June 2000 have you thought about how
to price them in regards to GST? If you haven't
sold the product pre-GST then it's a new ballgame. There are no cost savings to be considered
(just costs), no pre-GST profit levels to maintain
(but make sure you make a profit) and nor is
there a pre-GST price to take into consideration.
There is a new workshop package available
to help you with calculating your production
costs accurately. 'Managing Plant Costs in Production Nurseries' is a short course in how to determine the full cost of growing plants. It's been
written by Greg McPhee, National Training Manager for The Nursery Industry Association of Australia, phone him on 02 6622 7722 for further
information on this package.
How to do price lists
The government has said that you can't separately
identify the GST on price labels or price lists. So
growers can't just reprint their existing price or
stock lists with a note saying "Add 10% GST to
© NIAA 2000 — The Nursery Papers — Issue no 2000/06 — Page 1
these prices for sales after 30th June 2000". It should
say 'Prices only valid until 30th June 2000'. What you
can do is print a price list with both a price for sales
up to 30th June and another for after, example below.
Description
140 mm
pre GST
140 mm
200 mm
after June 30* pre GST
200 mm
after June 30*
Arbutus unedo
3.50
3.85
6.50
7.15
Choisya ternata
3.50
3.85
6.50
7.15
Pittosporum 'Green pillar'
3.60
3.96
6.70
7.37
Pittosporum 'Costello'(new line)
not available
until Aug 2000
4.10
not available
until Aug 2000
7.50
* prices after 30th June inclusive of GST
Warning for small growers
If your sales are less than $50,000 per year you don't have to register for GST. However unless you have an
Australian Business Number (ABN) you'll not be able to issue valid tax invoices. So any registered business
buying your products will be required to hold back 48.5 cents in the dollar and pay it to the tax office.
In addition whilst you can sell plants without charging GST you'll be unable to claim back GST paid on
inputs. Lets compare the results of two small businesses, one registered for GST and one not ;
Registered for GST
Not registered
Total sales value
$49,500
$45,000
GST payable on sales
$ 4,500
nil
Sales net of GST
$45,000
$45,000
Input costs (30% of $45,000)
$13,500
$13,500
GST payable on inputs
Gross profit
Sources of more information
GST Start-Up Assistance Helpline
Phone: 13 30 88
website: www.gststartup.gov.au
nil
$ 1,350
$31,500
$30,150
Acknowledgements
This paper was written by Ian Atkinson, National
Industry Development Manager, NIAA.
Phone: (02) 6282 7045 Fax: (02) 6282 6734
e-mail: [email protected]
Australian Tax Office GST Infoline
Phone: 13 24 78
website: www.taxreform.ato.gov.au
Australian Society of Practising Accountants
Phone: 1800 630 908
website: www.cpaonline.com.au
Page 2 — The Nursery Papers — Issue no 2000/06 — © NIAA 2000