Changing the default GST figure in a system could alter not only future transactions but inadvertently alter previous ones in the same financial year. That could cause problems with reconciliations, particularly where the rate change applies mid way in a return period e.g. June or December balance dates. One way to prevent this from happening would be to add a new GST code or rate your the system. However, some accounting systems may not allow multiple rates of GST to be used at any one time.
Firms will also have to look at the timing of supply contracts they enter into, if these cover the period of the transition from one rate to another. There are provisions within the GST Act which cover transition periods and people will need to look closely at how those apply to them.
Where service agreements are entered into now and the agreement spans the date of a rate increase, different GST rates could apply if the customer pays periodically. Commercial decisions must be made to the appropriate pricing and the impact on margins should payments cover periods spanning any rate change.
The following is a checklist of issues YBT considers to be prudent in preparing your business for the expected GST changes ahead:-
1. Can you maximize opportunities arising from any increased consumer activity in the lead up to a higher rate?
2. Can you increase the price charged to customers to cover a rate increase?
3. What changes do you need to make to your internal accounting & reporting systems?
4. Can your systems issue correct tax invoices as well as credit / debit notes at both the ‘old’ and ‘new’ GST rates?
5. Can your accounts payable systems process tax invoices at both the ‘old’ and ‘new’ GST rates?
6. Is your GST compliance position robust given the 20% increase in potential exposure a rate increase represents?
7. Will a GST rate increase affect your funding / cash flow position or cost base?
8. Do you have to make a payments basis GST adjustment?
9. Do you currently account for GST on non-core items such as compensation, breach or late payment fees? (some of these may not be subject to GST).
For assistance in reviewing the impacts on your business and how to effect the required internal changes (if any needed), please contact Matt West or Jacyln Ho at Your Business Team on 479-3890.
