GST
Out with the OLD (12.5%) in with the NEW (15%)
The GST Rate changes for all supplies to 15% from 1 October 2010.
To calculate the GST component of a GST inclusive price multiply by 3 and divide by 23 (3/23)
To calculate the GST exclusive value multiply by 20 and divide by 23 (20/23)
TIME OF SUPPLY
The change in GST makes it vital for all GST-registered businesses to be aware of the time of supply rules.
The time of supply (ie when the supply occurs) determines if the GST on the supply should be 12.5% or 15%.
The general rule is that a supply is considered to take place at the earlier of either:
• the time a tax invoice is issued, or
• the time a payment is made.
A supply that occurs before 1 October 2010 will have GST charged at 12.5%, while a supply that occurs on or after 1 October will have GST charged at 15%. (You have until 11 October to issue September invoices at 12.5% provided payment is due within 60 days)
Preparing your GST return to 30 September 2010
Invoice basis:
Ensure ALL invoices are entered into your creditors system.
Include items where you pay in instalments eg insurance, ACC, AP’s (unless covered by special time of supply rules – see over)
Payments basis:
Prepare a complete listing of ALL debtors (receivables) and creditors (payables) at 30 September 2010 (including other future payments at old GST rates (eg Insurance, ACC)
Prepare the GST Adjustment Calculation Sheet GST105 – do not send to IRD keep with your records
The purpose of the special adjustment form is to compensate for the difference in the GST you will pay / claim at 15% when the actual payments are made.
The formula to calculate the adjustment:
(Creditors – Debtors) ÷ 51.75 = GST to pay / (GST to claim)
If Debtors (Box B) is larger than Creditors (Box A) a GST credit is available - claim in Box 13
If Creditors (Box A) is larger than Debtors (Box B) GST is payable – enter in Box 9
An Example:
At 30 September you have outstanding Debtors of $13,500 (GST incl) and Creditors of $9,000 (GST incl)
When these amounts are collected / paid in October GST will be accounted for at the new fraction 3/23rds being:
GST on Sales $1,760.87 ($260.87 more GST paid than charged) and
GST on Expenses $1,173.91 ($173.91 more GST claimed than paid)
Using the special formula to calculate the adjustment to compensate for this difference:
(Creditors – Debtors) ÷ 51.75 = GST to pay / (GST to claim)
(9,000 – 13,500) ÷ 51.75 = 86.96 to claim (box 13)
This amount is claimed back as an adjustment in the return for the period to 30 September.
Special Time of Supply Rules
There are various special Time of Supply rules which apply. Please refer to our website for further detailed information if any of these apply to you, or phone us if you require assistance.
Services provided with periodic payments eg. Insurance
For contracts such as insurance premiums, which may be spread over 12 months, this would mean that premium instalments made after 1 October would have GST of 15%. This would have significant compliance costs for those insurance companies and the customer often when only small amounts of extra GST is payable
For contracts entered into before 1 October 2010 on an annual basis (or less) but with payment in instalments, GST will be payable at 12.5% for the remaining part of the contract provided:
- The customer had initially been given the option to pay annually;
- All remaining GST was accounted for in a return ending before 1 October (the insurer has paid up the GST)
- You were notified by the insurer prior to 30 October 2010 that you can only claim back GST at 12.5%
Contract Progressive Payments / Retentions
Progressive payments on contracts will have GST attached of 12.5%
- if invoiced pre 30/9/10 and
- must be payable, in full, on or before a date 60 days after invoice
Ensure that any retentions withheld and invoiced after 1 October are adjusted to GST of 15%.
Review how contracts are written when entered into pre 30 September to ensure the GST change is provided for.
Hire Purchase Agreements
If you buy goods on hire purchase, you may claim a deduction in the taxable period covering the date you enter into the agreement, regardless of the accounting basis you use.
There are no GST issues as GST is claimed at the beginning of the agreement.
Finance Leases – eg Car, photocopier
There is an option for finance lease contracts which were entered into prior to 1 October 2010 and have less than 5 years to run as at 1 October. All contracts of this nature will continue to be on the 12.5% rate if notified by the lessor. You will need to make an adjustment on each GST return.
Debit Notes, Credit Notes, replacement Invoices
If you issue or receive a credit or debit note, the GST must be calculated at the rate that applied at the time of the original invoice. The difference between the GST components of the original invoice and the debit or credit note should be accounted for as an “other” adjustment in either the Box 9 or Box 13 section of the GST adjustments calculation sheet If a good is purchased prior to 1 October but subsequently returned in October then the vendor can issue a replacement invoice at the original date of the purchase so that GST is neutral.
Lay-by Supplies
Time of supply is the time the goods are uplifted by the customer.
- Where possible, goods on layby should be uplifted prior to 1 October.
- If paid in full prior to 30 September, then 12.5% rate will apply and is irrespective to when the goods are collected.
- If payments received after 1 October then 15% GST will apply to the whole transaction – can you pass this on or are you going to pay the additional 2.5%
Deregistration an Option?
If you do not need to be GST registered (income below $60,000), it is the right time to assess whether you should deregister for GST. If you deregister prior to 1 October, you will be required to account for GST on the market value of any assets retained at the rate of 12.5%. If you deregister on or after 1 October, you will have to account for GST at the higher rate of 15% on the market value of those same assets. Anyone considering ceasing GST registration should contact us to review the pros and cons of doing so.
Change of Use Adjustments?
If you have assets that should be taken out of the GST net, consider if this should be done prior to 30 September to capture GST at 12.5%. This also applies to land or developments however give consideration to the funding of the GST portion and the long term plans for the property. We can assist you in this.
Computer Software
Where possible we would highly recommend updating your accounting software to the latest version to ensure transactions are treated correctly post GST rate change. If you have any concerns please contact us at Grace Team or your software provider for further clarification.
We have a few computer software support providers, who we recommend you ring, if you require specific information regarding your computer software.
Please contact us at Grace Team if you have any queries regarding the change over and how it affects you.
|
BR Group
