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Posted 14 April 2008
How important is GST compliance to your business? Over the last few years GST has become more of a focus point for many businesses due to increased IRD focus. GST now represents approximately 20% of the total IRD tax take which is slightly higher than the total corporate tax being collected and the IRD does devote significant resources to auditing GST.
With the IRD moving to a more “risk based” approach to auditing it is worthwhile to consider the following questions:
· Are you confident that your GST affairs are in order?
· Are your systems, internal processes and financial staff up to date with the latest developments in the GST environment?
· Are you aware of the GST inherent risks associated with your business and your industry?
By introducing a few basic GST best practices businesses can be more at ease with the knowledge that their GST affairs are being addressed, prior to the IRD unexpectedly wanting to perform a GST audit. Generally the IRD will aim to perform a GST audit every 4 years.
Below is a brief list of issues or ideas that should be considered when reviewing your businesses GST best practices as the IRD will normally focus on these issues when conducting a GST audit.
- Ensure that the data used for your GST calculations is accurately recorded from source documents particularly in the accounts payable system;
- Perform a ‘mini GST reconciliation’ of both sales and purchases when completing your GST return;
- At least once a year perform a detailed reconciliation between your financial accounts and your GST returns submitted;
- On a monthly basis review any suspense accounts and ensure that all transactions reflected in the suspense accounts are correctly accounted for in your GST return;
- Review any significant or unusual transactions as and when they occur;
- Perform a review on a sample basis of supporting documentation;
- Ensure that your company has an up to date ‘GST process and procedures manual’. This is one of the specific items the IRD will generally ask for when conducting a GST audit; and
- Ensure that you and your staff are all aware of the latest GST legislative changes and that GST training is provided on a regular basis.
Another helpful way to manage your GST risks and to ensure you maximise any GST opportunities available to you is to have an external GST review performed every two years or at a very least once every four years (i.e. the general time bar for GST). An external GST review with the implementation of the above practices should reduce any material GST risks in your business.
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