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.”