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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. 1. GST System Readiness<br />James Page, Tony Young & Ian Rowe<br />August 2010<br />
  2. 2. Introductions<br />GST rate change<br />Type of systems impacted<br />Requirements of systems<br />Impact on specific transactions<br />What should you be doing<br />Q&A<br />Agenda<br />
  3. 3. Objective<br />Intergen team<br />James Page<br />Tony Young<br />Tax expert<br />Ian Rowe<br />Director PricewaterhouseCoopers<br />Introduction<br />
  4. 4. Intergen TwilightGST Rate Change<br />August 2010<br />
  5. 5. Slide 5<br />GST rate increase<br />GST rate increase: wider context<br />Overview<br />Business issue<br />Rate change per se not hard BUT:<br /><ul><li>Incorrect current practices
  6. 6. Accounting / systems issues</li></ul>20% increase in GST exposures !!!<br />Key objectives:<br />Limit risk<br />Not “out of pocket” (prevent pitfalls)<br /><ul><li>Project team and timeline</li></li></ul><li>Slide 6<br />GST rate increase<br />Main areas for business<br />Overview<br />Pricing / margins<br />Contracts<br />Systems<br />Transitional rules / transactions that straddle 1 October<br />
  7. 7. Slide 7<br />What rate of GST applies?<br />Summary of time of supply rules<br />Single payment rule<br />General rule for supply of goods or services (s 9(1))<br /><ul><li>If “one-off” supply: earlier of invoice issued or payment receivede.g. over the counter sale of goods</li></ul>Invoice (TOS 12.5%)<br />Delivery<br />Payment<br />September<br />October<br />Might be able to rely on date invoice is generated rather than date of issue<br />GST rate increase<br />
  8. 8. Slide 8<br />What rate of GST applies?<br />Summary of time of supply rules<br />Periodic payments for services rule<br />Special rule for services paid over time (s 9(3)(a))<br /><ul><li>If services supplied under agreement for periodic payments: earlier of payment due or receivede.g. annual insurance paid monthly</li></ul>Date of invoice is irrelevant<br />payment due / received (TOS 15%)<br />monthly invoice<br />October<br />September<br />GST rate increase<br />
  9. 9. Slide 9<br />Time of supply – section 9(1) v section 9(3)<br />Practical pitfalls<br /><ul><li>e.g. Advertising services</li></ul>payment<br />invoice<br />September<br />October<br />December<br />November<br />If section 9(3)(a) – applicable GST rate is 15% even if services performed in September<br />Issues<br />Systems set up to account for GST when invoice is issued<br />Potential to under account for GST<br />GST rate increase<br />
  10. 10. Slide 10<br />GST rate increase<br />Price adjustments: transactions spanning rate increase<br />Practical pitfalls<br />Credit note should only be for discounted amount<br />In practice many systems cannot comply with requirements of GST Act<br />Common to reverse original invoice and issue new invoice<br />Technically – only one tax invoice for each supply<br />
  11. 11. Slide 11<br />Price adjustments: transactions spanning rate increase<br />Practical pitfalls<br />Example<br />Consultancy firm charges customer $2,000 (incl GST) and subsequently provides 10% discount<br />Tax invoice issued $222.22 of GST accounted for<br />Original tax invoice reversed $2,000 (incl $222.22 GST)<br />August<br />September<br />November<br />October<br />New tax invoice $1,800 (incl $234.78 GST)<br />GST rate increase<br />
  12. 12. Slide 12<br />GST rate increase<br />Returned goods v faulty goods – what rate applies?<br />Practical pitfalls<br />Faulty goods (exchanged for same goods)<br /><ul><li>Goods purchased pre 1 October and replaced post 1 October
  13. 13. No new sale for GST purposes so 12.5%
  14. 14. Risk that system will calculate GST at 15% on replacement goods – cost to retailer</li></ul>Returned goods (exchanged for something else)<br />Is original sale cancelled or varied?<br />New sale at 15%, variation at 12.5%<br />
  15. 15. Slide 13<br />GST rate increase<br />Section 78 - Can the rate increase be passed on to customers?<br />Practical pitfalls<br /><ul><li>But other legal constraints (Fair Trading Act, express exclusions)
  16. 16. Watch out for periodically renewed agreements
  17. 17. Best to update pricing / agreements etc by 1 October 2010</li></li></ul><li>Slide 14<br />GST rate increase<br />Transitional rules<br />
  18. 18. Customers on Payments basis?<br />Note: Special adjustment required<br />Payments Basis<br />GST rate increase<br />Slide 15<br />
  19. 19. Slide 16<br />GST rate increase<br />Contacts<br />Paul McGonigal<br />Manager<br />09 355 8102<br /><br />Wellington<br />Ian Rowe<br />Director<br />04 462 7274<br /><br />Christchurch<br />Richard Perrett<br />Partner<br />03 374 3013<br /><br />Auckland<br />Eugen Trombitas<br />Partner<br />09 355 8686<br /><br />Gary O’Neill<br />Director<br />09 355 8432<br /><br />Jarred Otto<br />Director<br />09 355 8073<br /><br />
  20. 20. Questions?<br />© 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. <br />
  21. 21. Systems impact<br />
  22. 22. Types of Systems impacted<br />Web sites<br />Point of Sales systems (POS)<br />Supplier catalogues<br />Reporting systems<br />Project management and accounting sub-ledgers<br />Customer price list data feeds<br />Estimation and quoting systems<br />Employee expense forms<br />Customer relationship management (CRM)<br />Procurement and Purchasing systems<br />Enterprise Resource Planning (ERP)<br />Manual spreadsheets (Cashflow)<br />
  23. 23. System Requirements<br />Able to change GST rate<br />Hold two GST rates<br />Update GST rates on master records such as products<br />Update recurring transactions<br />Update outstanding transactions<br />Prepayments<br />GST labels on documents<br />Ability to perform interim GST returns (depending on customers tax settlement periods)<br />
  24. 24. Impact on different transaction types<br />
  25. 25. What should business be doing?<br /> Take a strategic view<br /> Embark on GST transition project<br />Appoint internal team<br />Engage with technology suppliers<br />Create remedial action plan<br /> Implementing system changes<br /> Internal communications<br /> Mock GST cut-over<br /> Communicating strategy/changes to customers<br />
  26. 26. Systems readiness timelines - Dynamics<br />Actions:<br /><ul><li>Change GST Values in live (NAV Only)
  27. 27. Run Microsoft’s update process where applicable (NAV Only)</li></ul>Actions:<br /><ul><li>Complete all Sept billing with Sept 2010 dates
  28. 28. Complete interim GST return*</li></ul>Actions:<br /><ul><li>Mock GST change over
  29. 29. Update GST values in live (AX only)
  30. 30. Update & release any GST inclusive pricing</li></ul>Actions:<br /><ul><li>Raise support case for GST readiness assessment and support</li></ul>Oct 1st<br />September<br />August<br />Actions:<br /><ul><li>Complete GST Impact assessment across all systems
  31. 31. Finalise remedial action plan for all systems
  32. 32. Intergen to check GST coding structures</li></ul>Actions:<br /><ul><li>Invoice all un-invoiced sales
  33. 33. Complete all purchase invoices</li></ul>* Depending on customers GST return dates. <br /><ul><li>two-monthly return with the period ending 31 October 2010, or
  34. 34. six-monthly return with the period ending:
  35. 35. 31 October 2010
  36. 36. 30 November 2010
  37. 37. 31 December 2010
  38. 38. 31 January 2011
  39. 39. 28 February 2011</li></li></ul><li>How can we help?<br />System readiness check<br />Understand which systems could be impacted by the change in the GST rate. <br />Determine how your systems are affected, regardless of whether they manage transactions or deliver reports. <br />Create a solid foundation upon which to develop a more comprehensive systems-related approach to resolving any GST-related issues. <br />
  40. 40. PWC Contacts<br />Auckland<br />EugenTrombitas<br />Partner<br />09 355 8686<br /><br />Gary O’Neill<br />Director<br />09 355 8432<br /><br />Jarred Otto<br />Director<br />09 355 8073<br /><br />Paul McGonigal<br />Manager<br />09 355 8102<br /><br />Wellington<br />Ian Rowe<br />Director<br />04 462 7274<br /><br />Christchurch<br />Richard Perrett<br />Partner<br />03 374 3013<br /><br />GST rate increase<br />Slide 25<br />
  41. 41. Questions<br />
  42. 42. Thank You<br />