I am sure most of you will now be aware that the rate of GST increases from 1 October 2010 from the current rate of 12.5% up to the new rate of 15%. If this is news to you then you must have been enjoying a nice relaxing holiday overseas !!

We have prepared a summary of what the changes may mean for you and what steps those of you that are GST registered need to take to ready yourselves for the change on 1 October 2010. There are some things that everyone must do and some things dependant on whether you are registered for GST on an INVOICE BASIS or on a PAYMENTS BASIS and when your GST period ends.

Transition Rules applying to everyone

For the majority of you 30 September 2010 will be the end of a GST period. In October you will most likely be entering some invoices (dated 30 September or earlier ) for goods supplied in September or earlier in to your systems. You have until 11 October 2010 to do this for your Sales invoices. After this date you are obliged to start using the 15% rate. Therefore time is of the essence to get all your September invoicing completed before 11 October 2010. You can of course enter your suppliers (Creditors) invoices dated 30 September 2010 or earlier at the old rate up until you lodge your September GST return.

As the “time of supply” is the critical determinant as to which GST rate you should use there are a number of situations which span periods either side of the date of change of GST rate. These may require specific advice from us. Some examples are :

a. Land transactions where purchase and settlement span the date of change
b. Construction contracts with progress payments
c. Lay-by sales which are not completed by 1 October 2010.
d. Door to door sales- if made within 8 days prior to 1 October 2010 will attract the new rate of 15%.

If any of these apply to you then get in touch with us to ensure you are doing things correctly.

Preparing your 30 September 2010 GST Return

If you are registered for GST on an Invoice Basis

This should pretty much be business as usual as all GST on Goods or Services received or supplied up to 30 September 2010 is returned in that period.

If you are registered for GST on an Payments Basis

This becomes a bit more interesting. In effect you will have goods and services received or supplied before 1 October at the old rate of 12.5% which are not paid until after 30 September and will therefore be returned/claimed at 15% in future GST periods.

To compensate for this future “overpayment” or “over claim” of GST you need to make a GST rate change adjustment in the September 2010 return. This adjustment is the GST change on the difference between Accounts Receivable and Accounts Payable. You must prepare a listing of the value of your Accounts Receivable and Accounts Payable as at 30 September 2010.

The GST return form will include provision for this adjustment. An additional GST rate adjustment calculation form (GST 105) will be included along with the usual GST return form (GST 101A). If you need assistance with the completion of any of these please contact your usual advisor.

What if my GST return period end is not 30 September 2010

Where your GST period spans both sides of 30 September 2010 then there is a further transitional GST return form (GST104A) which effectively means you prepare two GST returns to cover the GST period. The first transitional return will cover the period from the commencement of the GST period up to 30 September 2010. GST will be returned at the rate of 12.5% and will need to include any GST rate adjustments as outlined earlier. The usual GST return will then cover the second part of the period from 1 October 2010 to the usual GST period end. GST will be returned at the rate of 15%.

Can my accounting system cope with this change or do I need to upgrade

While we cannot comment for all systems those that we are most familiar with, such as MYOB, Xero and QuickBooks, should have no problems with the rate change, and it is just a matter of amending the standard rate of GST at the appropriate time. While commencement of 1 October 2010 seems the logical time to do this it must be remembered that there will be a transition period during October where you are still processing September transactions in to the system. Care needs to be taken to identify which period you are processing transactions in to and which is the correct rate of GST to use.

If any of this is doing your head in then please give us a call. We love this stuff !!