Have you ever wondered whether it’s illegal for the price of a good or service to be advertised without GST( goods and services tax)?
Businesses that sell products or services can advertise prices in a variety of ways. However, there are a few requirements you need to meet before you present prices to your customers.
A common question that business owners ask is what they need to include in their advertised prices.
In this article, we’ll explain whether it is a legal requirement to include GST in advertised prices, what needs to be included in advertised prices, exemptions and penalties for non-compliance.
Read along!
Can you legally advertise prices without including GST?
It is illegal to advertise prices without including GST, according to the Australian Competition and Consumer Commission (ACCC).
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What are the laws?
The ACCC states that when you present prices to your customers, you must use component pricing. Therefore, the price you present to your customers has to be the total price of the good or service as a single figure.
This price needs to include the following:
- GST
- Tax
- Duty
- Fee
- Levy
- Additional charges such as airport tax
This is a legal requirement outlined by Section 48 of the Competition and Consumer Act 2010 (Cth).
Example
You own a clothing business and are advertising a jumper on your website. The price of the jumper is $330, including GST. Therefore, you must advertise the jumper as either ‘$330’ or ‘$300 plus $30 (GST) = $330.’
The ACCC describes this as a prominent single price. A prominent single price must be clear and stand out so that the consumer can easily notice it. When creating a prominent single price, you should also consider the following factors:
- Advertising medium
- Size
- Placement
- Colour
- Font
- Background
Exemptions
There are three primary exceptions to the rule. This exception applies to business-to-business (B2B) transactions, unquantifiable optional charges or extras and delivery charges.
Business to Business Transactions
The rule doesn’t apply only when the price representation is made exclusively by your business to another business, as this doesn’t involve advertising to consumers.
Example
You can advertise to another business that the price of the good that you’re selling them is $300 plus GST.
However, you should be aware that the primary issue with B2B prices is that they are commonly found on websites or public forums that the wider audience has access to. Therefore, if this is the case with your good or service, it may be recognised as a business-to-consumer interaction instead of a B2B interaction. As a result, you will be required to include GST in the full price of the good or service being advertised.
Unquantifiable optional charges
Another exemption for the advertisement of the single total price requirement is if there are any optional charges or extras that cannot be quantified. These refer to charges or extra that you’re unable to convert into a dollar amount at the time of displaying the price.
An optional charge or extra is something a consumer chooses as part of a product or service that isn’t part of the standard product or service.
Restaurants, bistros and cafes are also conditionally exempt from this requirement when the following conditions are met:
- When the menu displays that there is a surcharge that applies on a specified day or days, for example, public holidays
- The menu must display the words outlining the surcharge in a transparent and prominent way. It’s necessary to display the surcharge as clearly as the most noticeable price on the menu
- The menu must display the surcharge that is applied to drinks and food
- The surcharge that will be applied to the menu must be included even if the menu doesn’t include the prices of the individual food items or drinks
Delivery charges
You aren’t required to include delivery charges in the total price of your goods. However, this exception doesn’t apply if there is a minimum delivery charge that needs to be paid by the consumer that is known to you. If there is a minimum charge for delivery, you must add it to the total price or include it separately.
The (ACCC) requires your business to be clear and accurate and to avoid misleading consumers through its prices.
Australian Consumer Law
Australian Consumer Law (ACL) requires information about the pricing to be in plain language, legible, clear and readily available for the audience. The ACL also requires businesses to be accurate when presenting comparisons between prices.
What is price comparison advertising?
This refers to when a business compares the price of a good or service to its own previous price or a competitor’s price with the aim to draw consumers with potential savings. It is illegal to mislead your customers when you’re comparing your advertised price. In the following situations, you could be accused of misleading your customers:
- If you compare your price of goods or services to the RRP( Recommended Retail Price), where it hasn’t been previously sold at the RRP
- If the service or product you’re advertising wasn’t sold at the earlier higher price for a reasonable period
- If you’re comparing the price of your service or good to a competitor that’s located overseas or in a different area
What is misleading advertising?
Misleading advertising refers to advertising that provides a misleading or false impression to customers. You should be aware that it’s illegal for businesses to create claims about the prices of their services and goods to consumers.
Misleading advertisement of prices is illegal in all forms, for example, whether the advertisement is made in print or online.
This applies to advertisements created by any individual who represents your business. You should be aware that misleading advertising is illegal under ACL, even if you didn’t intend to mislead customers.
What are the penalties for non-compliance?
If you breach legal obligations in regard to advertising prices, you will face legal consequences.
If you fail clearly outline the total price of a good or service when advertising, you may breach the Competition and Consumer Act 2010, which was formerly known as the Trade Practices Act 1974, due to misleading customers.
An example of penalties that can be imposed by the ACCC was seen when Air Asia Berhad failed to comply with the laws. The airline was found guilty of breaching ACL. Therefore, the Federal Court imposed a penalty of $200,000.
The airline had breached single pricing provisions. The reason for this is that, for a period of 10 months, the airline failed to display some airfare prices, inclusive of all taxes, duties, fees and other mandatory charges, in a prominent and single figure on their website.
Recommended Reading
If you want a better understanding of the tax you must include when pricing your goods and services, read our article What is GST? If you’re a business that needs to register for GST, read our article How do I register for GST? to learn how to. To find out whether you’re required to include GST in quotes, read our article Do You Have to Specify GST on a quote?
Conclusion
Whether you’re a business owner or a consumer, you should be aware that it is a legal requirement for prices to include GST in their total. Failing to do this as a business will lead to a breach of ACL and legal consequences.
If you’re unsure about whether the prices you’re advertising for your business include GST, you should hire a lawyer for legal advice. Alternatively, if you’re a consumer and you believe a business isn’t displaying its prices correctly, you can also hire a lawyer for legal advice.
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