It's not exactly true - a 'worked example' sheds a bit of light on the issue.
If there is a flaw in my reasoning, please correct me.
Let's assume a straightforward situation.
Fred (not Fred's hedgecutting
) does a job and has input expenses of $30+GST and wants to have $100 in his pocket at the end for his work..
If NOT registered for GST.
Fred collects $133 from customer.
He pays $33 (GST incl) out for inputs, leaving $100 for his labour.
If registered for GST.
He initially pays out $33 (GST incl) for inputs.
A $3 GST refund is then collected back from ATO, so actual input cost is $30.
He wants $100 (in his pocket) for labour, so that means bill comes to $130.
Add on GST of $13.
So customer (who we assume is private, so not registered for GST or business expense) pays $143
Fred sends the $13 GST collected to ATO.
So after all the paperwork etc, Fred has the $100 in pocket for his labour.
So comparing:
On BOTH cases Fred gets $100 for work.
Cost to customer is $133 if Fred is NOT registered for GST,
$143 if Fred is registered.
Conclusion -- GST screws the end consumer.
Joe