Groan, Sweat &Tears - GST Changes October 1st

With contributions from Ruth Fegan, SBA Nelson

We all know that GST is going up to 15% on October first and any Sale or Purchase on or after this date must be charged at 15%. This is the largest change in the GST since 1989. Do you know what you need to do to be ready for the change? Are you sure? This article will try to outline some of the key elements for businesses. I explain the special GST rate change adjustment, hopefully preventing you from being out of pocket. You are advised to seek professional guidance from your accountant or the IRD website to ensure your business is meeting its obligations or to discuss any areas where you are unsure how your business falls inside or outside the guidelines.

The first thing to decide is whether you need to be GST registered and if not, de-register now! If you are GST registered with a turnover less than $60K per year it may be worth considering getting out now. Talk to your accountant about deregistering. You will be required to return GST on assets kept for private use but you only pay 12.5% IF you do this before the 1st of October.

The New Math to calculate the GST portion is take the GST Inclusive amount and multiply by the fraction 3/23: $112.50 X 3/23 = $14.67.

If you are on the Payments (cash) basis of reporting GST you have some work ahead of you. For Invoice and Hybrid basis there are things to do as well. I’ll start with Payments basis tasks.

Payments Basis

You report the GST Collected and Paid to the IRD based on actual payments made to or from your company in a specified date range. The Time of Supply rule will dictate how you charge GST and how you report it.

When there is a GST rate change (in this case from 12.5% to 15%) the general time of supply rule applies for most transactions. This means that a supply is considered to take place at either:

* the time an invoice is issued, or

* the time any payment is received by the supplier

DEPENDING ON WHICH HAPPENS FIRST.

You will be asked to adjust for outstanding debtors and creditors (receivables and payables) as at September 30^th, regardless of your reporting period. The IRD is sending out a GST rate change adjustment calculation sheet to be filed with your GST Return. If your next GST

return is due in November or later you will still need to report as at September 30^th your debtors and creditors.

Along with the GST change there are additional things to look at NOW. I am posting a separate newsletter on my website about these further items. Please find the GST – More Info Newsletter under the Newsletters section of www.yourcompanymatters.co.nz

Feel free to call me with any questions or queries. If you are unsure and want me to visit please book a time NOW. Understandably, any financial advisors, your accountant, or myself are very busy over this time so you are advised to book in early.

Check List - GST

• Are my books up to date for Sept. 30th
• Is my accounting software upgraded to handle the GST changes
• Have I finished writing off any bad debts
• Have my staff been fully trained re: quotes and pricing
• Any automatic payments, recurring transactions, memorised transactions, etc., have been changed appropriately
• Items’ prices have been reviewed, adjusted and communicated to customers
• All marketing material, website info, and communications out are changed - check your ads!!
• Any work in progress or outstanding orders are reviewed and either invoiced now or communicated to customer they will be invoiced after Oct 1st @ 15%

Check List - Payroll

• Ensure your software is up to date
• If calculating manually be sure to re-calculate with new rates for pays ending after October 1st
• Review standard contracts to ensure changes are reflected, i.e. FBT, superannuation
  

GST Websites

IRD

http://www.ird.govt.nz/changes/gst/?id=homepage

http://www.ird.govt.nz/changes/gst/businesses/supply/

http://www.gstadvisory.govt.nz/

IRD - PAYE Calculator

http://www.ird.govt.nz/calculators/tool-name/tools-p/calculator-paye.html?id=homepage

MYOB

http://myob.co.nz/business/gst-change-2010-1258091530373

Xero

http://help.xero.com/#GSTandYou

GST and MYOB

Running the GST Transitional Assistant

There are some busy people at MYOB testing and re-testing the running of the GST Transitional Assistant. We have some suggestions to make it run smoothly for you if you have a very large company file, i.e. lots of Cards, Items or Activities. Remember, the assistant is going into each individual “thing” and changing the GST code. For Items this means once in for Selling and once in for Buying. It will take time.

• Run the assistant on the fastest MYOB computer; so if you use MYOB over a network run it on the Server of Host Computer
• Log in as a single user
• You may encounter problems if any stock item codes have apostrophes
• Disable all screen savers and power saving settings
• Don’t do ANYTING else on that computer while the Assistant is running
• Expect it to take 1 – 3 hours
• Back Up before you start
• Don’t worry if you see “Not Responding” – this is normal
• Stay calm, be patient
  

The return AFTER September 30th

So, you have upgraded your MYOB software, done your GST return for the period ending September 30^th and now you are ready to prepare your next GST return, i.e. for period ending November 30^th. BUT, you have had one or more transactions dated AFTER Oct 1^st which you entered at the old 12.5% rate as required. What does MYOB do? Sort it for you of course. At the time of writing this I am assured the new GST Report 101 will add GST Inclusive transactions total to the normal Total Sales and Income and Total Purchases and Expenses line AND make the appropriate adjustment too. What you want to do is run the GST Transitional Reports to verify the totals on the return. SORTED.

Newsletters online

To re-visit a past issue of my newsletter please go on line to http://www.yourcompanymatters.co.nz/ and follow the links on the left to past issues.

Happy Reading!

Perpetual Inventory - There’s a Good Idea

In getting ready for the GST change many clients with large inventories have had to face the question of doing additional stock takes, how and when to re-price their items, and what was the actual value of stock on hand. One thing to try for the future and helps ease stock takes is using a perpetual inventory system. Look at your stock and divide it into groups. Then, each month do a stock take of that group. A short count up of stock once a month sure eats a two day count up once a year. Have a go!

Humour

I’ve searched and searched for a kiwi joke about GST. I found Canadian jokes, US jokes and some dumb blonde joke but no humour from Kiwi’s on GST. So, I’ll try to write one...if I can.

What did one small business owner say to the other small business owner about the GST increase?

Aren’t you glad we make under $60,000 a year running our businesses in New Zealand and therefore don’t have to be registered for GST!

Okay, let me try again….

Tom: Did you hear the one about the GST increase

Sally: No

Tom: Neither did I

I know, I know…one more go

A little boy asked his Dad about what was so Good about the Goods and Services Tax. The Dad answered:

Well, son, is it Good for Government to get more money to pay down their debt. Small business owners really like providing the Service of being the government’s tax collectors free of charge. Lastly, the Tax is like a doubled headed axe shaped like a tee that is good for chopping us above the head and below the knees.

So, I won’t give up my day job

And to save a little face….

The Washington Post's Mensa Invitational once again invited readers to take any word from the dictionary, alter it by adding, subtracting, or changing one letter, and supply a new definition.

Intaxicaton (n.): Euphoria at getting a tax refund, which lasts until you realize it was your money to start with.