Number's up for exporters

By FIONA ROTHERHAM

New Zealand exporters risk losing business or up to half their income under Australia's new tax regime if they do not apply for an Australian Business Number by the end of this month.

Applications must be made to the Australian Tax Office by May 31 in order to receive a number before the start of Australia's GST on July 1.

The biggest risk to doing business in Australia without one is if the Australian customer withholds 48.5 per cent of the payment to the NZ supplier.

The new withholding regime "makes businesses the policemen for GST," said Ernst & Young senior tax manager Allan Bullot.

Legislation requires businesses to withhold 48.5 per cent - the top marginal income tax rate - if a supplier does not have an Australian Business Number. This is to prevent cash jobs by non-GST registered businesses.

While it is not meant to apply to non-resident companies operating in Australia, the Australian Tax Office's brochures do not spell that out.

Thus, an NZ company may need an Australian Business Number to be on the safe side even if it does not need to be GST-registered.

Many Australian corporates are setting up their computer systems to automatically deduct the withholding tax if an invoice does not contain the number.

The tax office says it will take up to 12 months to reclaim the tax. It is due to release guidelines by the end of the month, after the Australian Business Number deadline, on how to deal with non-residential businesses operating in Australia.

Deloitte's GST specialist, Peter Felstead, said the issue could cost Kiwi exporters business.

In a competitive situation, the Australian customer may simply decide to opt for a local supplier if there are hassles surrounding withholding tax.

The tax office estimates it will take three to four weeks to process an Australian Business Number application electronically and longer for manual ones.

Already NZ applications have struck problems.

The Australian Tax Office's electronic system rejects all applications that do not include an Australian street address. Most NZ exporters do not have Australian branches.

Deloitte dodged the problem by providing its own Australian address for clients.