Is Your Business Ready for the GST Increase? (Spring 2010)

With the upcoming GST increase from 12.5 percent to 15 percent, effective 1 October 2010, there are a number of considerations to be made to ensure your financial accounting systems are in place and ready.

We put forward the following aspects that you should consider now so that your business moves from 30 September to 1 October without any hiccups.

Systems

  • Can your system cope with different rates for several months – manual intervention may be required?
  • Can your systems issue debit and credit notes at both the old and new rates?
  • Check legacy systems for hard-coded GST and any GST templates and change them to apply for the new rate.
  • Ensure system changes are tested before being implemented.

Reporting

  • Do you need to file two GST returns if your taxable period spans 1 October 2010?
  • Do your invoicing templates, spreadsheets and reconciliations need to be changed?
  • Do your staff need training or guidelines to implement the new rate?

Legal

  • Check contracts that span 1 October to ascertain their correct treatment.
  • Ensure template contracts reflect the GST increase post 1 October 2010.
  • Do your documents state GST inclusive, exclusive or plus GST basis? This could impact on the price charged and amount received.
  • Consider whether your prices can be legally increased for continuous supplies.

Selling

  • Can you pass the GST rate increase onto your non-GST registered customers and how you will apply it? For example, can you increase the price of a product at $19.95 to $20.39, or increase other products more to compensate?
  • Consider whether you need to inform customers of the increase.
  • Consider the impact on profit margins.
  • What will be the impact of the increase on consumer spending patterns before the rate increase and possible slump after, for cash flow and warehousing?
  • Can you get your customers to pay early so the lower 12.5 percent rate applies?
  • Will your marketing materials need to be changed and how will you manage the change of shelf prices of products overnight?

Exempt supplies

  • Will any change of use adjustments be affected? Note the date of acquisition for which rate to use.
  • What will be the impact of the GST increase on your bottom line?

Leasing

  • Consider what the GST rate will be for each period and what the applicable rate is at that time.
  • Check the type of lease – operating and finance leases are subject to GST at the applicable rate; hire purchases are charged with the GST rate at the start of the contract.

Other

  • How will the increase of the taxable value of Fringe Benefits impact on your business?Whilst the current challenging trading times continue, the LTC structure may be successfully employed by some within the winery sector.

Published in WINE Hawke’s Bay Spring 2010.

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