GST Changes and Impact Assessment
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Whilst on the face of it the GST rate rise seems fairly straightforward, many businesses are just beginning to assess the impact of this rate change on their systems.
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GST Changes and Impact Assessment
- 1. GST System Readiness James Page, Tony Young & Ian Rowe August 2010
- 2. Introductions GST rate change Type of systems impacted Requirements of systems Impact on specific transactions What should you be doing Q&A Agenda
- 3. Objective Intergen team James Page Tony Young Tax expert Ian Rowe Director PricewaterhouseCoopers Introduction
- 4. Intergen TwilightGST Rate Change August 2010
- 10. Slide 10 GST rate increase Price adjustments: transactions spanning rate increase Practical pitfalls Credit note should only be for discounted amount In practice many systems cannot comply with requirements of GST Act Common to reverse original invoice and issue new invoice Technically – only one tax invoice for each supply
- 11. Slide 11 Price adjustments: transactions spanning rate increase Practical pitfalls Example Consultancy firm charges customer $2,000 (incl GST) and subsequently provides 10% discount Tax invoice issued $222.22 of GST accounted for Original tax invoice reversed $2,000 (incl $222.22 GST) August September November October New tax invoice $1,800 (incl $234.78 GST) GST rate increase
- 13. No new sale for GST purposes so 12.5%
- 14. Risk that system will calculate GST at 15% on replacement goods – cost to retailerReturned goods (exchanged for something else) Is original sale cancelled or varied? New sale at 15%, variation at 12.5%
- 16. Watch out for periodically renewed agreements
- 18. Customers on Payments basis? Note: Special adjustment required Payments Basis GST rate increase Slide 15
- 19. Slide 16 GST rate increase Contacts Paul McGonigal Manager 09 355 8102 paul.g.mcgonigal@nz.pwc.com Wellington Ian Rowe Director 04 462 7274 ian.rowe@nz.pwc.com Christchurch Richard Perrett Partner 03 374 3013 richard.perrett@nz.pwc.com Auckland Eugen Trombitas Partner 09 355 8686 eugen.x.trombitas@nz.pwc.com Gary O’Neill Director 09 355 8432 gary.oneill@nz.pwc.com Jarred Otto Director 09 355 8073 jared.a.otto@nz.pwc.com
- 20. Questions? © 2010 PricewaterhouseCoopers. All rights reserved. “PricewaterhouseCoopers” refers to the network of member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity.
- 21. Systems impact
- 22. Types of Systems impacted Web sites Point of Sales systems (POS) Supplier catalogues Reporting systems Project management and accounting sub-ledgers Customer price list data feeds Estimation and quoting systems Employee expense forms Customer relationship management (CRM) Procurement and Purchasing systems Enterprise Resource Planning (ERP) Manual spreadsheets (Cashflow)
- 23. System Requirements Able to change GST rate Hold two GST rates Update GST rates on master records such as products Update recurring transactions Update outstanding transactions Prepayments GST labels on documents Ability to perform interim GST returns (depending on customers tax settlement periods)
- 24. Impact on different transaction types
- 25. What should business be doing? Take a strategic view Embark on GST transition project Appoint internal team Engage with technology suppliers Create remedial action plan Implementing system changes Internal communications Mock GST cut-over Communicating strategy/changes to customers
- 29. Update GST values in live (AX only)
- 31. Finalise remedial action plan for all systems
- 34. six-monthly return with the period ending:
- 35. 31 October 2010
- 36. 30 November 2010
- 37. 31 December 2010
- 38. 31 January 2011
- 40. PWC Contacts Auckland EugenTrombitas Partner 09 355 8686 eugen.x.trombitas@nz.pwc.com Gary O’Neill Director 09 355 8432 gary.oneill@nz.pwc.com Jarred Otto Director 09 355 8073 jared.a.otto@nz.pwc.com Paul McGonigal Manager 09 355 8102 paul.g.mcgonigal@nz.pwc.com Wellington Ian Rowe Director 04 462 7274 ian.rowe@nz.pwc.com Christchurch Richard Perrett Partner 03 374 3013 richard.perrett@nz.pwc.com GST rate increase Slide 25
- 41. Questions
- 42. Thank You
Editor's Notes
- Our objective is to provide you with some insight into what you need to be thinking about with the impending GST change and hopefully answer some of your specific questions.We’ve teamed up with our tax partner because we’re not tax specialists, we’re system specialists and can help you implement the strategies that you and your tax experts have come up with.
- Basically there are more than just ERP systems which need to be thought about in regards to this GST change, you need to review each and every system that either is used for transactions, or reporting to make sure the GST rate is not hard coded.
- As obvious as it sounds there will be plenty of systems where the rate is hard coded, changing it may not be as easy as you would expect. How many places does it need to be changed.You will need to hold two rates for at least three months after October 1 to deal with returns or other transactions that are rated at 12.5Many systems have default rates held against products, resources or other things that are sold, these would need to be updated. Some other systems may hold the rate against customers or Vendors, again these would need to be updated.Recurring transactions such as rent etc. will need to be updated, potentially new invoices will need to be generated for customersOutstanding transactions will need to be updated, this is potentially the most complicated piece. There will be regulatory impacts, such as whether the transaction shodl be 12.5 or 15% but then potential commercial decision such as shuold you pass the price increase onto your customers, potentiallty this will nto be a single answer as you may need to chack contracts etc to see if GST is stipulated.Microsoft have identified this as a unique New Zealand requirement at least for the Dynamics NAV space. This is definitely an area that needs a tax specialist but the system needs to be able to deal with how to process invoices prepaid or where deposits are held.
- Quotes not invoiced before October 1 will need to have their GST rate changed, whether or not the Gross price increases would be an internal business decision. So as far as the system is concerned it’s not as simple as adding 2.5%.Similarly Orders not invoiced will need to have their GST rate changed. The difference with orders is that it may have been partially shipped or received or invoiced. What rate should be changed is . But outstanding lines will need to be adjusted, your options here would be to close out that line of the quantity invoiced with the old GST rate and create a new line for the outstanding quantity with the new GST rate. You could also look at closing all orders and recreating them with outstanding amounts and the new GST rate. Your choice of method could depend on how many open orders you have.Purchase Invoices – if you’re receiving purchase invoices from suppliers for November with the incorrect GST rate you are probably best sending it back to them and asking for a correct one.Prepayments – definitely one for the accountants, there seems to be a bit of a grey area, as prepayments can allow the rate to be based on the old rate but there is also a clause that you can’t be doing it just to avoid paying tax.Any recurring transactions will need to be looked at, for contracts each one may need to be reviewed to see if price changes are allowed, either way the GST will need to be adjusted, it just may affect your profit. It will require you to provide your Customers with a new tax invoice, for rent for example, or asking your suppliers for the same.
- There are potential decision to be made, it’s not black and white about simply adding 2.5%. Will you endorse quotations? Will your vendors? What about partially delivered orders? What about the potential for a rush of orders before October 1, will you have enough inventory, can you provide the services in time? Can you offer prepayments to customers?Will you need new supplier catalogues, will you need to provide your suppliers new catalogues? ……..When can you begin implementing these changes, do you have a test environment ready to test changes, wouldn’t suggest doing this in a live system without testing no matter how simple you think you are.Internal communications, how will staff handle customer queries, will they know how to handle credits that relate to pre OctoberConduct a mock GST cut over and acceptance testing processSome of your customers may not be as knowledgeable about the GST rules so outlining your strategy around price updates, but also giving them the option of receiving/paying for goods before October 1.