Issue Forty Three, September 2010
GST RATE CHANGE - PART THREE
DID YOU KNOW?
GST RATE CHANGE - PART THREE
As you are now aware the GST rate changes to 15% from 1 October 2010.
The Inland Revenue Department has published the "GST rate change adjustment calculation sheet" (GST 105) to assist with the calculation of adjustments required for debtors and creditors as at 30 September 2010.
As mentioned in the August edition of Tax Tidbits to follow is a case example of a debtor adjustment for James, a self employed mechanic;
- James is registered for GST on a two monthly, payment basis.
- The current GST return covers the period 1 August 2010 to 30 September 2010.
- James services a car for a customer on 28 September 2010. James invoices the customer $1,333.33 plus GST of $166.67 giving a total of $1,500.00.
- James' invoice is dated 30 September 2010. Under the rules governing the change in the GST rate, James has until 11 October 2010 to issue his invoice to the customer.
- James' customer receives the invoice on 10 october 2010 and makes payment on 20 December 2010.
- In the past, James would have declared GST in the GST period when payment was received. However, on 20 December 2010, the GST rate is 15% which means that James would need to pay GST of $195.65, despite only charging the customer GST of $166.67.
- To overcome this shortfall, James completes the GST rate change adjustment calculation sheet as at 30 September 2010 and makes the required adjustment in his September 2010 GST return. James is entitled to a credit of $28.99 in his September 2010 GST return for this transaction.
- The net GST payable by James for this transaction is $195.65 (being the GST payable in the December 2010 period), less $28.99 (being the GST credit received in his September return), which equals $166.67 (being the original GST charged). Hence James is not disadvantaged by the GST rate change occurring between the date of the invoice and the date payment is received.
Please contact HWI Limited if you require assistance or guidance with your September 2010 GST return.
Did You Know?
HWI can help you with preparing the GST rate change adjustment calculation sheet.
If your GST return period spans 30 September 2010 you will need to complete a "GST Transitional Return". Please contact HWI Limited for assistance.
Disclaimer Information contained within this document is of a general nature and does not constitute advice. Readers are cautioned not to act or reply on it without first seeking professional advice. The material and contents provided in this publication are informative in nature only. It is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required, professional advice should be obtained.
