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GST is increasing: Are your systems ready?

In New Zealand, GST (or the Goods and Services Tax) is increasing from 12.5% to 15% on 1 October 2010.

For both consumers and businesses, this has implications for everyone, impacting what we pay for day-to-day items, through to how we account for these. Inland Revenue provides updates as to what’s happening on its website at http://www.ird.govt.nz/changes-2010/gst/.

With a deadline in place, organisations cannot ignore these changes. Organisations of all sizes and industries need to understand how the change impacts their business. Whilst the percentage change is prima facie easy to understand, what needs more thought are the complexities of managing that change from a systems perspective – there are a number of key considerations.

In talking with our customers, there are a common set of questions emerging, namely:

  • Which systems in your organisation handle GST calculations? Most of us will immediate think of our accounting system or forward facing sales systems, but many of us may have other systems that are less obvious.
  • Can you change the GST rate or is this hard-coded? This has obvious implications with regard to how easy it may be to bring every system up to date when the new rate comes into effect.
  • Can you change the GST rate retrospectively? Why is this important? For a period of time, organisations will have to deal with situations which may involve both rates.  Additionally, some systems allow GST rates to be defined with effective dates which makes the cutover simpler to manage.
  • Will open purchase and sales order lines be updated by this GST rate change in your system or do you need to perform an update to the data? Again, this has implications with regard to how easy or complex it may be to update and maintain your systems.
  • Does your system(s) manage credits for purchase and sales? Will your system(s) be able to credit back at the 12.5% GST rate for credits to orders raised prior to the GST rate change? A more complex scenario, but one that many organisations will face.

We encourage organisations to ask themselves these questions, and to put a plan in place. With just over three months to go, this is an issue that requires urgent consideration.

We will be running a Twilight seminar on this topic in the near future – keep an eye on our Events page or our Twitter feed for updates. In the meantime, if you have any other questions, feel free to reach out to me: james.page@intergen.co.nz.


Disclaimer: This information isn’t intended as formal advice, nor does it necessarily reflect the official stance of Intergen. We recommend all organisations take appropriate steps to identifying and validating their approach to the GST change.

Posted by: James Page, Practice Director Partners, Alliances & Channels | 15 July 2010

Tags: ERP, GST

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