Home – New Forums Money matters GST registration, how does it affect existing contracts

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  • #978795
    Designing Buildings
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    I am registering the business for GST for the new financial year and any future new clients will receive contracts and invoices including GST.

    I also have a number of contracts from the last few months that will extend well into this financial year. Are they exempt from GST or will I need to reduce my invoice and then add the GST figure to get the original agreed fee? What is normal practise in this instance?

    #1109551
    Designing Buildings
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    Did I ask a stupid question or did I not explain it well?

    #1109552
    MyGreatIdea
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    I would continue to charge the agreed price, then add GST to it. They will claim the GST they pay you back anyway, so it’s not going to alter the cost to them.

    But I would send out a letter/email first, advising them that you are now registered for GST and that future invoices will include GST.

    Wendy :)

    #1109553
    Chris Brodie
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    Hi,

    I agree with Wendy, add GST to the existing price but also let your clients know. I assume that you aim to earn more than $75,000 for this financial year and that is your reason for registration. Use this in your letter to clients to show that you are doing it because you are required to and this should help clients accept the change. Also you said you had existing contracts? If there are formal contracts you may need to check there is no clause regarding GST and how or when it may be charged.

    All the best,

    #1109554
    victorng
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    You do need to be a bit careful and check any quotes and T&Cs that are in place. For corporate customers, if your T&Cs say that fees are ex GST, then you’re fine to add it on. If they are silent as to whether inc or ex then I think you need to treat your fee as inc GST unless your client agrees otherwise.

    If your client is an individual, your agreed fee needs to be treated as inc GST (unless the client agrees otherwise) otherwise you could fall foul of the component pricing laws.

    Cheers,
    Victor

    ^ this isn’t legal advice, I’m just shooting the breeze … anyway, I’m no good with numbers.

    #1109555
    CloudAccounting
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    Designing Buildings, post: 121949 wrote:
    I am registering the business for GST for the new financial year and any future new clients will receive contracts and invoices including GST.

    I also have a number of contracts from the last few months that will extend well into this financial year. Are they exempt from GST or will I need to reduce my invoice and then add the GST figure to get the original agreed fee? What is normal practise in this instance? I would first go back to the source being the contract you have in place with them to see if there is any refernce to GST. I would then do a mail out to all advising that you have now registerd for GST and that effective from 01/07/12 you will be chaging GST. As long as they are registed for GST it makes no real differenec to them as they will be able to claim the GST back so net effect for them is negligible.

    #1109556
    Designing Buildings
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    Thanks for the feedback. Most of my clients are individuals, not companies. I have decided to honour existing agreements for lump sums and finish those contracts without adding GST. I have updated my hourly rate to add GST and advised all clients of that.

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