NZ firms warned over payments fish-hook

SYDNEY - New Zealand suppliers of goods and services to Australian firms have been told to consider getting an Australian business number (ABN) to avoid hiccups in payment from next month.

A 10 per cent goods and services tax will come into effect on July 1 as part of big changes to the Australian tax system.

Among the changes is the introduction of ABNs, which Australian businesses will need to claim back credits for the GST they are charged by suppliers - and which is ultimately paid by consumers.

Under the new regime, an Australian buyer receiving an invoice from an Australian supplier without an ABN will generally be required to deduct 48.5 per cent in withholding tax. The withholding tax will not apply to foreign suppliers who do not do business in Australia.

But Sydney-based New Zealand lawyer Rhys Guild said there appeared to be a flaw in the way Australian firms were upgrading their accounting systems to cope with ABNs.

Mr Guild, a GST specialist with Minter Ellison, said several firms obtaining goods and services from overseas were overlooking the fact that few, if any, of their foreign suppliers would need ABNs.

Their accounting programmes would not distinguish between local and foreign suppliers when no ABN appeared on the invoice, and would automatically deduct 48.5 per cent, he said.

Several foreign firms were applying for ABNs to avoid the problem.

- NZPA