6 Expenses That Businesses Could Save In 2022 Before Next Year’s GST Increase

Most SMEs could have faced rising cost pressures over the past two years as they grappled with additional regulatory compliance costs during the coronavirus pandemic and, more recently, higher labour, borrowing costs, and raw materials.

Yet, there is another impending cost pressure to face from 1 January 2023 as the goods and services tax (GST) will be raised to 8% from the current rate of 7% and to eventually 9% in 2024.

To help businesses save some money before the GST increase next year, we have listed 6 expenses that could be frontloaded this year.

Read Also: Getting Your Business Ready for GST Rate Change? Read This

#1 Commercial (Non-Residential) Property Purchase

According to the URA’s rental index for office and retail spaces in the central region, demand for office space increased by 2.4% in the second quarter compared to the previous quarter. This could be a result of 100% of workers returning to the office as allowed under the revised safe management measures in April 2022. Instead of paying more for rent, companies may decide to purchase commercial properties (i.e., retail, office, and industrial spaces) either for their own use or for investment.  

However, unlike residential properties, commercial property sales and leases may be subject to GST depending on whether you are purchasing as an individual (sole proprietor) or as a GST or non-GST registered company. Hence, the potential GST savings from purchasing this year may be a good incentive to review your non-residential property portfolio in 2022.

Read Also: Is 2022 A Good Year For Businesses To Invest In A Commercial Property?

 #2 Renovation & Fittings Costs

If you have purchased or rented a new commercial space for your own use, or if your current office space simply needs to be rejuvenated with better co-working spaces, you may wish to bring forward your renovation and repair plans to this year before the GST increases.

As renovation costs are still expected to remain high given the current tight labour force in the construction sector and high material costs, planning ahead could save you a decent amount of the GST increase.  

Additionally, you may want to consider replacing existing run-down furniture and fittings this year for more cost savings.

Read Also: Sophia Goh, Founder & Principal Counsellor Of Sofia Wellness Clinic, Shares How Much It Costs To Set Up A Clinic In Singapore

#3 Purchase Of Commercial Vehicles & Company Cars

Despite the uncertain economic situation, Certificate of Entitlement (COE) prices have been trending upward over the previous two years. Compared to the prices from August 2020 (1st bidding) to August 2022 (1st bidding), category A (for cars below 1,600cc) has grown by around 188%, while prices for categories B (for cars above 1,600cc) and C (goods vehicles and buses) have climbed by 140% and 130%, respectively. Analysts attributed tight supply of COEs, among other factors, for this record-breaking surge in COE prices, with some anticipating the trend to continue until 2023.

However, despite the recent price increase, businesses that provide delivery services (i.e., for passengers and goods) may not have any choice but to accept the current market rate. Therefore, if your vehicle’s COE is expiring in the next one to two years, making a purchase in 2022 could save you an additional one or even two percent of GST cost before 2024.

Read Also: Cost Guide To Buying A Commercial Vehicle In Singapore

#4 Recurring Subscription Expenses

An SME may need to subscribe to different software services (i.e., accounting software Xero, Microsoft Office, or Google Workspace), or media publication services (i.e., local newspapers or trade magazines) as part of their business operations. 

It could be a good option to renew these recurring subscription services this year on a longer renewal cycle (if possible) to save on the potential GST increase in the following two years.

#5 IT Hardware

Electronic gadgets like our smartphones and computers have become an essential part of our everyday lives.

Businesses that are heavily reliant on such technology must set aside capital expenditure at some point to replace their existing obsolete gadgets or acquire the latest and most powerful gadgets.

Whether it is an old TV in the boardroom or the laptops and the other IT peripherals that have been giving problems, saving on the extra GST could be an incentive to make a tech refresh this year.

Read Also: [Price Guide] Best Value For Money Laptops In 2021: Asus VS Lenovo VS Dell

#6 Corporate Pass Memberships

Instead of giving a fixed allowance sum, some companies may provide attraction passes for their employees as part of their welfare benefits. For example, a corporate membership for a well-loved attraction like the Singapore Zoo could cost as much as $26,070 annually.

If you intend to extend such benefits to your employees in the following years, you could save some money by frontloading the payment in 2022.

Read Also: 16 Corporate Passes To Singapore Attractions You Can Buy In Time For Holidays

Power your business with Digital Business Banking Solutions

OCBC Velocity helps you view all your accounts details, comes integrated with E-Invoicing and cash management capabilities as well as access to our award-winning trade financing solutions. Use OCBC Velocity, your business in your hand.

Subscribe To The DollarsAndSense Business Pass

Enjoy what you are reading and want more? Join The DollarsAndSense Business Pass and unlock access to valuable tools, exclusive networking opportunities, and tap into the wisdom of industry experts to fuel your business expansion!

You May Also Like