Discount program

[Astrid]

Hi

I want to run an incentive program for my existing clients for the rest of the year - any client who refers new business to me gets a certain discount on his next order.

Is there anything I have to think of taxwise? GST only on the reduced amount I assume, but is there anything else important?

Can't get in contact with my tax consultant today so I thought I might ask around here.


Thanks
Astrid

[Burgo]

You could probably claim the discount given to your existing clients as Promotional or an accountant would probably say discounts given.

Promotional because you are promoting your business through existing clients
I know it sounds like Im splitting hairs, but thats my opinion

[KarenC]

This is only a thought because you aren't actually giving out cash or a gift voucher - it's only good if they return and claim it? Would the following work?

Client returns with discount coupon reference number (either email or paper one) and on the invoice you would say,
Artwork for 'x' = $x.00
Repeat business discount = -$x.00
Balance = $x.00

Please post for us any advice from your accountant.

[Astrid]

Hi Karen and Burgo

Thanks for your replies.
I will post advice from accountant.

Karen, yes, that's what I thought as well.



Cheers
Astrid

[Astrid]

Hi

Here is the advice I got:

Before you can claim the 15% as "promotional expenses you must declare your income on a “before discount” basis.
However, if you declare your income as “after discount” basis, you can’t claim the 15% as "promotional expenses.

The technically correct method is the first method, that is declare 100% of your incomes and then claim the 15% as "promotional expenses. Only problem is it can get messy if you don’t keep good records.
The easier way is to declare your income on a cash basis that is basically declaring 85% and forget about the 15%.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

I'm good at record keeping ;-)

Cheers
Astrid