1 October GST & Income Tax Changes Update

Posted Wednesday, 18 August 2010 by Brena Smith 

As you're most likely aware there's rate changes happening to GST, Income Tax and also FBT on 1 October 2010. Here's a brief overview of how this may affect you and some steps you may need to take to ensure a smooth transition.

GST Changing from 12.5% to 15%

From 1 October 2010, if you are GST registered, you will need to add GST at 15% to any products or services you sell. This change may affect...

• Any accounting software you use - check with your supplier for upgrades.
• Printed stationery such as invoices, statements, receipts, quote forms, price tags, brochures etc.
• Pricing and profit - will you increase your pricing to cover the GST increase or absorb it?
• Any automatic bank payments you have setup including direct debits
• Period end 30 September 2010 GST return will require special treatment.

With your GST return for period ending 30 September you will need to prepare a list of all your creditors and debtors that you owe or owe you money. This is for calculating the final GST adjustments at 12.5%. Inland Revenue will send you a form to guide you through this process if you prepare your own GST returns. If Kiwitax prepare your GST returns we will still need a creditors and debtors list from you and will send details of this in the next few weeks.

With regard to changing your pricing if you include GST: We recommend you increase your pricing with the change to 15% GST unless you have good reason not to. With the associated lowering of income tax rates the government's intention is to move taxes around rather than to take more tax. By absorbing the increase you will decrease your profit. Customers will be expecting GST to increase and the flip side is they should have more income to cover it.

To see how your prices may be affected by 15% GST check out our calculators, especially the 12.5% to 15% Price Converter.

We're also offering a zero obligation 6 month free trial of all our Easy GST services. A timely option if you're preparing your own GST returns and would like us to look after them for you. Please check it out :)

Income Tax / PAYE Changes

The intended offset of the GST rise is reductions in Income Tax rates. If you employ people (including yourself) there's a few things to be aware of...

• Any payroll software you use will need updating to the latest version.
• For manual payrolls you'll need to use new PAYE tax rates / PAYE calculators at IRD's website.
• Any automatic bank payments for wages may need amending.

An excellent source of PAYE related news is www.acepay.co.nz - nice, easy payroll software too.

FBT Changes

There are changes happening to Fringe Benefit Tax rates. Mostly these will be handled at Annual Accounting time. We'll advise any affected clients as required.

Summary

1 October is coming up quickly so please make some time to consider what changes you will need to implement and create a strategy to roll these out. Find the potential problems earlier rather than later!

Inland Revenue are now sending out information to guide you through the change to 15% GST and Income Tax. It's helpful information so please ensure you take a look. We will be writing to GST registered clients over the next few weeks but in the meantime if you do have any questions or concerns please ask.

We're here to help and more than happy to!