gst system readiness - intergen · customer relationship management (crm) point of sales systems...
TRANSCRIPT
James Page, Tony Young & Ian Rowe August 2010
GST System Readiness
GST System Readiness
Introductions
GST rate change
Type of systems impacted
Requirements of systems
Impact on specific transactions
What should you be doing
Q&A
Agenda
GST System Readiness
Objective
Intergen team James Page
Tony Young
Tax expert Ian Rowe
Director PricewaterhouseCoopers
Introduction
Intergen Twilight
GST Rate Change
August 2010
Slide 5 GST rate increase
GST rate increase: wider context
• Business issue
• Rate change per se not hard BUT:
– Incorrect current practices
– Accounting / systems issues
• 20% increase in GST exposures !!!
• Key objectives:
1. Limit risk
2. Not “out of pocket” (prevent
pitfalls)
– Project team and timeline
Overview
Slide 6 GST rate increase
Main areas for business
• Pricing / margins
• Contracts
• Systems
• Transitional rules / transactions that straddle 1 October
Overview
Slide 7 GST rate increase
What rate of GST applies?
Single payment rule
• General rule for supply of goods or services (s 9(1))
– If “one-off” supply: earlier of invoice issued or payment
received
e.g. over the counter sale of goods
Invoice (TOS 12.5%)
Delivery Payment
September October
Summary of time of supply rules
Might be able to rely on date invoice is generated rather than date of
issue
Slide 8 GST rate increase
What rate of GST applies?
Periodic payments for services rule
• Special rule for services paid over time (s 9(3)(a))
– If services supplied under agreement for periodic
payments: earlier of payment due or received
e.g. annual insurance paid monthly
• Date of invoice is irrelevant
September October
monthly invoice
payment due / received
(TOS 15%)
Summary of time of supply rules
Slide 9 GST rate increase
Time of supply – section 9(1) v section 9(3)
• If section 9(3)(a) – applicable GST rate is 15% even if
services performed in September
• Issues
− Systems set up to account for GST when invoice is
issued
− Potential to under account for GST
September October
invoice
November December
Practical pitfalls
• e.g. Advertising services
payment
Slide 10 GST rate increase
Price adjustments: transactions spanning rate increase
• Credit note should only be for
discounted amount
• In practice many systems
cannot comply with
requirements of GST Act
• Common to reverse original
invoice and issue new invoice
• Technically – only one tax
invoice for each supply
Practical pitfalls
Slide 11 GST rate increase
Price adjustments: transactions spanning rate increase
• Example
− Consultancy firm charges customer $2,000 (incl GST)
and subsequently provides 10% discount
August September
Original tax invoice
reversed $2,000
(incl $222.22 GST)
Tax invoice issued
$222.22 of GST
accounted for
October November
New tax invoice
$1,800 (incl
$234.78 GST)
Practical pitfalls
Slide 12 GST rate increase
Returned goods v faulty goods – what rate applies?
• Faulty goods (exchanged for same goods)
– Goods purchased pre 1 October and replaced post 1
October
– No new sale for GST purposes so 12.5%
– Risk that system will calculate GST at 15% on
replacement goods – cost to retailer
• Returned goods (exchanged for something else)
− Is original sale cancelled or varied?
− New sale at 15%, variation at 12.5%
Practical pitfalls
Slide 13 GST rate increase
Section 78 - Can the rate increase be passed on to customers?
Where the price is stated as: $112.50
incl GST
$100
+ GST
$112.50
(silent)
All existing agreements with
customers
Yes Yes Yes
New and existing agreements with
customers from 1 Oct to 31 Dec 2010
Yes Yes Yes
Agreement entered into on or after
1 Jan 2011
No Yes No
Practical pitfalls
• But other legal constraints (Fair Trading Act, express
exclusions)
• Watch out for periodically renewed agreements
• Best to update pricing / agreements etc by 1 October 2010
Slide 14 GST rate increase
Transitional rules
• Customers on Payments basis?
• Note: Special adjustment required
Payments Basis
Slide 15 GST rate increase
Slide 16 GST rate increase
Contacts
Auckland
Eugen Trombitas
Partner
09 355 8686
Gary O’Neill
Director
09 355 8432
Jarred Otto
Director
09 355 8073
Paul McGonigal
Manager
09 355 8102
Wellington
Ian Rowe
Director
04 462 7274
Christchurch
Richard Perrett
Partner
03 374 3013
Questions?
© 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.
Systems impact
GST System Readiness
Types of Systems impacted
Web sites
Enterprise Resource Planning (ERP)
Customer relationship management (CRM)
Point of Sales systems (POS)
Procurement and Purchasing
systems
Project management and accounting sub-ledgers
Supplier catalogues
Customer price list data feeds
Estimation and quoting systems
Employee expense forms
Reporting systems
Manual spreadsheets (Cashflow)
GST System Readiness
System Requirements
Able to change GST rate
Hold two GST rates
Update GST rates on master records such as products
Update recurring transactions
Update outstanding transactions
Prepayments
GST labels on documents
Ability to perform interim GST returns (depending on customers tax settlement periods)
GST System Readiness
Impact on different transaction types • Business assessment in accordance with the Section 78. GST
rate will be 15% Quotes
• Prepaid – 12.5%
• Shipped – 12.5%
• Open – 15% (Business decision around gross value) Orders
• 1 Oct dated invoices at 15%
• Incorrectly calculated AP invoices should be sent back Invoices
• Prior to 1 Oct – 12.5%
• Note: Special clause applicable for Tax Avoidance Prepayments
• Contracts – review to determine if price changes allowed
• New tax invoice required Recurring Transactions
GST System Readiness
What should business be doing?
Take a strategic view
Embark on GST transition project Appoint internal team
Engage with technology suppliers
Create remedial action plan
Implementing system changes
Internal communications
Mock GST cut-over
Communicating strategy/changes to customers
GST System Readiness
Systems readiness timelines - Dynamics
Oct 1st
Actions:
• Invoice all un-invoiced sales
• Complete all purchase invoices
Actions:
• Mock GST change over
• Update GST values in live (AX only)
• Update & release any GST inclusive
pricing
September August
Actions:
• Complete GST Impact
assessment across all systems
• Finalise remedial action plan for
all systems
• Intergen to check GST coding
structures
Actions:
• Complete all
Sept billing with
Sept 2010 dates
• Complete
interim GST
return*
* Depending on customers GST
return dates. two-monthly return with the
period ending 31 October 2010, or
six-monthly return with the period
ending:
• 31 October 2010
• 30 November 2010
• 31 December 2010
• 31 January 2011
• 28 February 2011
Actions:
• Raise support case for
GST readiness
assessment and support
Actions:
• Change GST Values in live (NAV Only)
• Run Microsoft’s update process where
applicable (NAV Only)
GST System Readiness
How can we help? System readiness check Understand which systems
could be impacted by the change in the GST rate. Determine how your systems
are affected, regardless of whether they manage transactions or deliver reports. Create a solid foundation upon
which to develop a more comprehensive systems-related approach to resolving any GST-related issues.
GST System Readiness
Slide 25 GST rate increase
Auckland
Eugen Trombitas
Partner
09 355 8686
Gary O’Neill
Director
09 355 8432
Jarred Otto
Director
09 355 8073
Paul McGonigal Manager 09 355 8102 [email protected] Wellington Ian Rowe Director 04 462 7274 [email protected] Christchurch Richard Perrett Partner 03 374 3013 [email protected]
PWC Contacts
Questions
Thank You
