15% GST has arrived NZ

Waking up this morning came with a realisation of how fast September had flown by and how quickly the change to 15% GST in NZ had arrived. Many were predicting a spike in sales for retail businesses in September with consumers attempting to beat the GST increase, but it’s not certain that retailers saw this.

It would have been interesting to see council staff scurrying around hurriedly emptying parking meters, or large buckets of change from pokie machines being banked – so that the cash takings could be returned at 12.5% instead of 15%. Instead the most notable signs last night that things were about to change were the queues at petrol stations and supermarkets.

Talking to several business owners about the GST changes yesterday highlighted the fact that while many of us are on top of the change, there is still confusion as to what it means for businesses after 1 October and beyond. For businesses returning GST on an invoice basis, it’s generally a simple change, but it is important to determine ‘time of supply’ and be aware of exceptions. A handy place to look for answers to specific questions is on the GST Advisory Panel website – scroll down on their site for working examples.

Businesses on a payments basis need to enter invoices into their accounting system to make the ‘GST rate change adjustment’ based on total invoices outstanding. This adjustment is simply to make up for the difference in GST that will end up being paid for monies received from today (at 15%), where the initial invoice was issued at the old GST rate. For those still blissfully unaware or even slightly confused, we’ve put together a quick step by step working example.

Download the PDF

The rate change calculation is automatic for those on Xero, but for others on less intelligent software this will have to be a manual adjustment. Overnight we also adjusted the default GST rates to 15%, which you will have already seen this morning when you logged in. To see this and the other work we’ve done for you, watch our short video.

It’s not too late to switch to Xero and take the hassle out of the GST changes. Talk to your accountant or sign up here.

2 Comments

Daniel Hunt
October 10, 2010 at 2:56 pm

I agree Sue, GST is an area that many businesses struggle with and it is crucial that they get this right. Inland Revenue regulations make it difficult to request that GST positions be changed once a tax return has been filed and does not take practical errors in returns lightly. The hike in the rate of GST will be challenging for New Zealand businesses but Xero’s software will assist greatly with the transition.

There is a provision in the May 2010 Budget for an additional $120 million in funding tax audits and compliance activity; a clear directive to the business community that they need to be getting GST right the first time. While the rate of GST has changed, the underlying principles and concepts that provide its foundation have remained the same.

What does this mean for the business community?

To assist with the change, businesses need to ensure that all their accounting and support staff have the proper skills and training for their position. Without knowing the “nuts and bolts” of practical GST, staff can become a liability to themselves, their colleagues and their employers.

What can you do for your company?

Business owners have a responsibility to the community to ensure their staff continue with professional development; gaining knowledge, improving ethical and practical judgement and continuously improving on technical expertise. This is only possible if knowledge has already been obtained on the practical basics.

It is crucial that staff are fully equipped with the necessary skills, practical knowledge and understanding of New Zealand GST to ensure they stay out of trouble and off the IRD’s radar screen.

Daniel Hunt and Associates (DHAtax) have designed and developed a short, interactive online GST course which will provide you and your staff with the knowledge and practical basics of GST. Please visit http://www.taxtraining.co.nz for further information.

David Kime
October 10, 2010 at 10:47 pm

Over here in the UK we have gone from 17.5% to 15% then back to 17.5% and now we are going to 20%, so we are getting quite used to it. Xero certainly makes it easier.

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