Google has recently announced that it will be charging all its clients the standard GST of 10% applicable in Australia.
How does this impact Australian businesses?
For businesses with annual revenues over $75,000 AUD who have already registered for GST, it will simply mean claiming a tax credit for the GST paid. So this is mostly an accounting entry with little impact, except for some additional bookkeeping.
The really fledging start-ups and micro-businesses which have an annual turnover less than $75,000 AUD and have not registered for GST are the ones that will be significantly hit. They have to absorb the cost as they are not able to claim the credit back from the Australian Taxation Office (ATO). This category of businesses, already under the pressure of ever-increasing advertising costs will, to some extent, get less than their money’s worth. Ironically, these are the businesses that need the online advertising to survive.
Regardless of whether a company is registered for GST or not, the move certainly impacts online advertising budgets from a working capital perspective. Since the GST will be deducted from online advertising limits, a $1,000 AUD spend will now buy approximately $909 AUD worth of advertising. With online advertising becoming increasingly indispensable, most businesses will simply increase the ad spend by 10%.