37 replies to this topic

[StephenSLR]

I've just received a bill from a mechanic.

 

He's included all the parts, materials (consumables) and labour.

 

He's then put 10% GST on top of it all.

 

Are they supposed to charge 10% GST on the parts and materials they buy?

 

If correct then I'm paying GST twice.

 

It may be right but I thought I'd just check.

 

s

Edited by StephenSLR, 28 February 2014 - 11:53 AM.

[Redslur]

From my dealings all parts in the trade are purchased pre-tax (GST).  And then the tax is included afterwards. May differ from state to state though?

[StephenSLR]

From my dealings all parts in the trade are purchased pre-tax (GST).  And then the tax is included afterwards. May differ from state to state though?

 

That would make sense, I'll have to check on that.

 

s

[S pack]

I've just received a bill from a mechanic.

 

He's included all the parts, materials (consumables) and labour.

 

He's then put 10% GST on top of it all.

 

Are they supposed to charge 10% GST on the parts and materials they buy?

 

 

s

If the business has an ABN and is registered for GST then basically yes.

There are two ways a business is allowed to produce a tax invoice. Either list all prices inclusive of GST and separately show the total amount of GST inclulded in the invoice total, or list all prices exclusive of GST, add the GST to the subtotal to give the invoice total inclusive of GST. The invoice total will be the same either way.

[Dr Terry]

Redslur is basically correct. The way we do it in the auto trade, like any other reseller, AFAIK, is that everything is purchased ex. GST & then the GST is added last.

 

The only 2 legalities are that any retail quoted total must include GST & that it is only brought into calculation once.

 

Dr Terry

[StephenSLR]

everything is purchased ex. GST & then the GST is added last.

 

Cheers, this is what I'll check.

 

s

[Rockoz]

If I buy parts from my wholesaler he charges me GST.

When I supply the part to my customer with a suitable mark up I add GST to the part and any labour involved.

I then owe the difference between the GST I paid and the GST I collected to the Tax Man.

[StephenSLR]

If I buy parts from my wholesaler he charges me GST.

When I supply the part to my customer with a suitable mark up I add GST to the part

 

Do you include the ex GST price on the docket or the GST included price?

 

To which you add GST on the final balance.

 

s

[S pack]

Do you include the ex GST price on the docket or the GST included price?

 

To which you add GST on the final balance.

 

s

I do. I list all my prices/charges exclusive of GST then add GST to the subtotal to arrive at the total price inclusive of GST.

 

That way my clients can see exactly what my value of the invoice is and how much is going to the Tax Dept.

Edited by S pack, 28 February 2014 - 12:46 PM.

[76lxhatch]

You'd be lucky to find an accounting system that will allow you to do it wrong

[Rockoz]

I include GST on the total at the end of the Invoice

When I quote I dont include GST in the price but always add "plus GST" to avoid confusion.

 

Daz thats the basic way it works but I can also claim back GST on indirect expenses such as fuel etc

[StephenSLR]

You'd be lucky to find an accounting system that will allow you to do it wrong

 

As with any system - garbage in, garbage out.

 

As long as you enter the data correctly there shouldn't be a problem, is there anything to stop someone inputting a GST inclusive price when they're supposed to input a price that is ex-GST?

 

s

Edited by StephenSLR, 28 February 2014 - 12:57 PM.

[S pack]

is there anything to stop someone inputting a GST inclusive price when they're supposed to input a price that is ex-GST?

 

s

If they did then it would just become 10% more profit margin for the business owner.

[StephenSLR]

If they did then it would just become 10% more profit margin for the business owner.

 

This is what concerns me.

 

I spoke with the mechanic and he tells me that the rates he used are ex-GST.

 

s

[S pack]

What the business pays for a part, inclusive or exclusive of GST is really irrelevant to the consumer. The business can apply whatever profit margin they want, be it 10%, 100% or 1000% then they must apply the 10% GST to their selling price.

 

The difference between the GST the business paid for the part and the GST they collect when they sell it is only relevant for accounting purposes.

Edited by S pack, 28 February 2014 - 01:23 PM.

[StephenSLR]

The business can apply whatever profit margin they want, be it 10%, 100% or 1000% then they must apply the 10% GST to their selling price.

 

Indeed, some businesses like to be transparent and will show you how their prices are made up including profit margins.  

 

For a mechanic they would usually include electricity, water, profit, etc. in their labour rate?

 

s

Edited by StephenSLR, 28 February 2014 - 01:30 PM.

[76lxhatch]

If they did then it would just become 10% more profit margin for the business owner.

More likely the GST would not be claimed by the business owner, so they wouldn't make any more money but the tax would be doubled up.

Its a bit late to be querying prices after you receive the bill anyway, they can charge you what they like - the time to choose whether to accept it is when you commission the work.

[StephenSLR]

Its a bit late to be querying prices after you receive the bill anyway, they can charge you what they like - the time to choose whether to accept it is when you commission the work.

 

True.

 

I always do a sanity check just in case.

 

s

[S pack]

Indeed, some businesses like to be transparent and will show you how their prices are made up including profit margins.  

 

For a mechanic they would usually include electricity, water, profit, etc. in their labour rate?

 

s

 

Labour charges and profit margin are all income to the business less outgoings ie: lease or loan payments, electricity, wages etc etc.

You'll be hard up finding many businesses (if any) that will show on their invoice how much they actually paid for an item and what % of profit they apply to it.

 

 

More likely the GST would not be claimed by the business owner, so they wouldn't make any more money but the tax would be doubled up.
 

Any business owner who is entitled to claim the GST on their business inputs and doesn't would be mad, and GST accounting systems don't allow the tax to be doubled up.

Edited by S pack, 28 February 2014 - 02:13 PM.

[StephenSLR]

You'll be hard up finding many businesses (if any) that will show on their invoice how much they actually paid for an item and what % of profit they apply to it.

 

I guess it's different in the project world, with some companies we have an open book arrangement and go through a line by line analysis showing each item and we even get scrutinised on hours, etc. if something looks a bit high.  They accept that businesses are in it for a profit and we clearly show the profit margin.

 

s

Edited by StephenSLR, 28 February 2014 - 02:22 PM.

[Dr Terry]

I guess it's different in the project world, with some companies we have an open book arrangement and go through a line by line analysis showing each item and we even get scrutinised on hours, etc. if something looks a bit high.  They accept that businesses are in it for a profit and we clearly show the profit margin.

 

s

Yes, it is totally different. You would be hard pressed to find a mechanic who could tell you what his running costs are. Obviously the labour rate covers his wages, electricity, rent, phone, waste disposal, sundries, etc. etc. etc. but very few have ever sat down & worked it out.

 

Most shops charge a labour rate that is an industry standard or even more commonly what others in their area charge. Many workshops undercharge & wonder why they can't take home a decent wage, or even worse go broke in the process.

 

Dr Terry

[TerrA LX]

Redslur is basically correct. The way we do it in the auto trade, like any other reseller, AFAIK, is that everything is purchased ex. GST & then the GST is added last.
 

 
Dr Terry

What helps me understand it all is that we (ABN whole sale, retail, service providers etc etc) are all collectors of GST, the only person to pay is the end user.

[StephenSLR]

Yes, it is totally different. You would be hard pressed to find a mechanic who could tell you what his running costs are. Obviously the labour rate covers his wages, electricity, rent, phone, waste disposal, sundries, etc. etc. etc. but very few have ever sat down & worked it out.

 

Most shops charge a labour rate that is an industry standard or even more commonly what others in their area charge. Many workshops undercharge & wonder why they can't take home a decent wage, or even worse go broke in the process.

 

Dr Terry

 

I do realise in small business things are different.  I also will never question a mechanics hours, I know from experience the number can become an arbitrary figure if they've spent longer working on it and often do.

 

s

[Rockoz]

Maybe this will help clear things up.

As a supplier ie wholesaler, they quote prices excluding gst. I regularly get quotes saying xyz plus gst.

Its as though they seem too lazy to calculate it.

 

To the end user prices are usually quoted including gst

 

I generally supply to commercial customers and most will quote to them excl. gst. But I always quote incl. gst.

Saves confusion at the end.