What does the GST rate change mean for business owners?

If you are registered for GST, you need to start planning now for the GST rate increase to 15% on 1 October 2010.

We have compiled this list to help you implement the GST rate change in your business.

GST Registration

Are you registered on a voluntary basis, or is your annual turnover less than $60,000?  If so, contact us to discuss whether deregistration from GST may be desirable before 1 October 2010.

Marketing & Sales

You may experience an increase in sales prior to 1 October, which happened back in 1989 in advance of the GST rate increasing from 10% to 12.5%.

It is also possible demand may subsequently dip after 1 October, so you may need to plan how to maximise sales between now and October and consider invoicing customers in advance to accelerate the time of supply so that the 12.5% rate applies rather than the 15% rate.

Pricing

How will you deal with the GST rate increase as part of your overall sales and pricing strategy? 

Will you pass on the GST increase to your customers?  Will you absorb it, or will you increase your price?

Your pricing and sales strategy will depend on the GST status of your customers (i.e. are they GST registered or are they end-users who cannot reclaim GST), the demand for your goods and services, not to mention your competitors' reactions to the same issues.

How will you update prices on your website and marketing material?  You also need to plan how you will update shelf and catalogue prices - a time consuming process that may potentially have to happen overnight..

How will you inform your customers of any price increase?

Contractual Issues

Some of the issues you need to consider include:

• Do your customer contracts enable you to pass on the extra GST?
• Do you have periodic supply agreements in place that span the GST rate increase?
• What about goods on lay-by?  You'll be up for GST at 15% on any balances collected from customers from 1 October.
• Do you collect a deposit as part of your trade terms?  If so, you may want to increase the deposit amount  to avoid a negative cashflow impact.

Systems & Processes

• Can your accounting software issue tax invoices, debit and credit notes at both old and new rates?  If you are using desktop accounting software and are not on a support contract you may need to upgrade to new software to accommodate the GST rate change.
  Now may be an ideal time to switch to Xero - an easy-to-use online accounting system.   As a Xero Partner, we can introduce you to Xero and have you up and running to ensure that you are ready before 1 October 2010. Contact us today!
• What changes will be required to POS and Till technology?
• Do you have any internal Excel spreadsheets or other templates where the GST rate is 'hardcoded' in?  If so, each of these will need a careful review.
• How will you ensure that you are recording GST correctly on invoices you pay?  You may need to check all invoices to ensure the correct rate is applied.
• Do you need to request new invoices for perpetual supplies (e.g. rent)?
• Do your staff need guidelines and/or training so they are up to speed?

Transitional Issues

• To simplify the accounting for those who return GST on a payments basis, the new 15% rate will apply to all payments made or received from 1 October 2010.  An adjustment based on creditors and debtors as at 30 September will ensure that supplies provided before 1 October but not paid will  be subject to the old rate.
• If your GST return period straddles 1 October, you'll need to complete a special one-off GST return as at 30 September.
• What if you make a mistake in your GST return for the GST period that includes 1 October 2010?
  In a recent media release, Inland Revenue have indicated that if businesses make efforts to comply with the new rate, but make an error that can be reasonably attributed to the change, late payment and filing penalties and use of money interest will be remitted.
• If you are unsure how to handle the changeover, we offer a review services for GST returns - to ensure the GST rate change is handled correctly.  Contact us now to arrange this.

GST Changes for Importers

• The actual date of import determines the rate of GST payable.  If the goods are imported on or before 30 September 2010, then GST is payable at 12.5%, but if they are imported on or after 1 October 2010 the rate of GST is 15%.
• Previously Customs did not collect revenue when it amounted to less than $50 i.e. when the value of the goods is $399 or less.  On 1 October 2010, this threshold will reduce to NZ$333. See the Customs website for more information and examples.

And finally...Cashflow

Now might be a good time to recalculate your cashflow forecast to ascertain the impact the GST rate increase will have on your budget and financial facilities.  Contact us now!

What Next?

Need help implementing the GST rate change in your business?  Contact us now for a comprehensive GST Rate Increase Review.

We'll systematically go through all of the issues likely to affect your business and from there we'll complete an Action Plan to ensure you are ready for the change.

GST Workshop

Would you be interested in attending a free workshop during August  to discuss implementing the GST rate change in your business?  Call us on 04 471 5350 or email us now to register your interest.

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