GST hike not a simple matter for accounting packages

Financials software vendor head says rate rise will be complicated

Enprise Group CEO Mark Loveys warns that New Zealand businesses will incur unexpected costs as a result of the GST increase to 15% on October 1 unless they take steps now to prepare for the transition.

He says that from an IT perspective there is a general perception that the rate change is a simple issue. “Unfortunately, it is not that simple,” he says.

“Many businesses do not appear to have realised all the implications of the change. Changing the GST rate in your accounting system is one thing but it is the issues around the changeover – such as customisation of documents and reports and the timing of particular transaction types and situations – that are going to catch people out.

“Businesses need to start preparing well in advance of October 1 for the introduction of the new GST rate.”

Loveys says examples include the handling of transactions such as lay-bys, credit notes, back orders, and quotations that are processed within time frames that span the GST changeover date.

“Someone will have to pay the increased GST. It will be up to the business to make up the shortfall if it does not charge the customer the correct amount. Companies dealing in large volumes of goods, or companies that order goods in advance are more vulnerable in this situation.”

Inland Revenue has yet to release final official guidelines for businesses. A GST advisory panel has been established to consider the transitional issues businesses are facing and will provide regular comment on its website.

Loveys says the flexibility of modern accounting software packages and the ease with which businesses can customise them can be a double-edged sword.

“GST hasn’t changed for more than 20 years. Since then, a huge number of customised reports and forms have been created for individual business requirements that may involve GST calculations.

“Without thorough testing, businesses won’t know for sure whether their invoices and credit notes will apply the correct amount of GST or whether GST will be reported correctly.”

“The sheer number of companies that need to have their systems and processes checked is a big issue.

“It’s going to be a busy time for the local accounting software industry.”

Tags GSTEnprisegst advisory panelMark Loveys

4 Comments

Dave Lame

1

GST doesn't work because it is not based on free libre no-cost cheap and open-source software. The idea of GST comes from a single proprietary software vendor - Microsoft. If it was based on open source software, and I was the only person in the universe who could understand it, then I would make a lot more money.

Microsoft has secretly lobbied the government to include 'services' in the name of this tax, making it the 'Goods and Services Tax'. I note that Microsoft is currently trying to sell this country its cloud services. Coincidence? I think it is unlikely.

Out of protest, I will not be eating my dinner this evening and I will be telling my friends to do the same. Please pass my message on.

Love
David T. Lame

Sharkbait

2

It gets even more complicated when councils send out their rates assessments for the year, whereby ratepayers can pay the annual fee in advance, thereby paying 12.5% on the total amount, or in installments, i.e. 12.5% for the first installment, and 15% for the installments that are due after 1 October. The challenge for computerised systems comes in where the assessment has to reflect what the ratepayer has to pay, as GST changes 3 months after the financial year has started!

Lawrence D'Oliveiro

3

I already updated the system I built for managing my time, billing, GST and IR3+IR10 return. It now assigns the appropriate rate to each GST period as it's opened. And the invoice generation now also assigns the right rate based on the date of the invoice.

How hard could it be? :)

zombie

4

GST calculation is based on the date the invoice is posted not the date on the invoice. Posted meaning sent via the mail system or handed over to NZ Post. So if your invoice is printed on 30 Sep but posted on 1st Oct, the GST should be 15%

At least thats what our tax people have said - PWC.

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