gst system readiness - intergen · gst system readiness ... customer relationship management (crm)...

Derek Lamb & Aaron Thorn August 2010

GST System Readiness


Introductions Pricing Time of supply GST rate change issues Types of systems impacted Requirements of systems Impact on specific transactions What should you be doing Q&A

Agenda


Objective

Intergen team Derek Lamb

Tax expert Aaron Thorn Tax Partner Deloitte

Introduction

© 2010 Deloitte Touche Tohmatsu

GST

It was New Zealand’s worst kept

secret….

GST is increasing

to 15% from 1

October 2010


2010 Total Tax Revenue

5

$14.4b

$8.9b

$23.5b

$1.7b

$5.4b


= More IRD audit

attention on GST


Pricing Issues

• Price points

- The increase in GST will have an impact on gross profit margins

- Decision: Whether to bear the cost of the increase or pass it on to the consumer

- Product price $9.95 to $10.17

• Impact on consumer spending – inventory management

• Price tags and marketing material will need to change overnight


Where prices are fixed by contract

• Legislation already in place to modify existing contracts to lift price

• GST exclusive contracts (“ price + GST”)

• GST inclusive contracts


Time of supply rule – When is GST triggered?

• General rule is the earlier of:

‒ Time an invoice is issued by the supplier; or

‒ Time payment is received by a suppler

• Means that GST rate is not dependent on when goods and services are provided

• Pay deposit in September, pay remainder and receive goods in October – GST at 12.5%

• Place order or receive delivery in September, but only invoiced in October - GST at 15%

• But problems with exceptions:

‒ Periodic supplies

‒ Progressive supplies

‒ Laybuys/coin operated machines

‒ Sales via agents

‒ Deposits vs stakeholdings


Solutions from the IRD’s GST Advisory Panel

• Special Report and draft legislation issued Tuesday 10 August, responses

required Monday 16 August

• September dated invoices issued in October

• Ongoing contracts e.g. Insurance

• Finance Leases e.g. Motor Vehicle Lease

• Replacement invoices


The fixes ...

‒ Subrogation payments received by Insurers

‒ Successive supplies e.g. phone line rental

‒ Layby sales

‒ Private training establishments


Operational issues – invoices at incorrect rate

• Charge GST at 12.5% to customer when correct rate is 15%

• Required to return GST at 15%

• Receive invoice from suppler at incorrect rate

• Tax invoice not valid

• No input tax claim available

• Withhold payment? Be on the front foot


Operational Issues

• Auto- payments, Auto-receipts, and Direct debits

‒ New a new tax invoice

‒ Change the payment arrangement

‒ Unless supplier elects to take the proposed fix

• Deposits – uplift or you just lost security

• Rebates / incentives / refunds / cash-backs

• Deferred Payments Scheme account limit

• Vouchers


Operational Issues

• Vending machines

• Bad debts write offs and recoveries

• Entertainment adjustment

• Change in use adjustments

• Exception testing after the rate change

• Update reconciliation spreadsheets and templates

• Budgeting and cash flow projections

• Staff training and guidelines


Reporting Issues

• GST Returns post 1 October – all 12.5% supplies put through adjustments lines

• Return period straddles 1 October - Special GST returns

• Penalties.


And plenty more ....

Aaron Thorn

Partner | Tax

Deloitte

Direct: +64 (0) 3 363 3813

[email protected]

Systems impact


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)


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)


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


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


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)


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.

Questions

Thank You

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