Change in New Zealand GST Rate

The GST rate in New Zealand was increased from 12.5% to 15% on 1st October 2010. Please see details below for how this is handled in MoneyWorks.

Last Updated 10th January 2011

You don't need to upgrade your MoneyWorks

MoneyWorks was designed for a GST environment, so no upgrade is needed, even if you have a very old version (although we would be much happier if you always used the current version). However the existing GST Guide form will no longer work correctly, as it is based on 12.5% GST -- indeed it should not be used once the new rate comes into effect. You need to use the new GST Guide report (see below). The GST Report however will continue to function correctly, so you can continue to extract the figures off that.

New GST Guide Report

The new GST Guide is now available. This will work for GST cycles ending on or before 30 Sept 2010 (i.e. 12.5%) and cycles at 15%. For details click here.

The current Guide Form version is 2.0.7 (updated 10th January 2011).

Note for Cashbook users: The original GST Guide posted did not work for some Cashbook users. The Guide Form was updated on 3rd Dec 2010 to overcome this problem. If you are having problems, please download the new guide form and replace the earlier one that you downloaded.

What you need to do in MoneyWorks

First off, you will need to change the GST Rate in your tax table. Doing this in MoneyWorks is easy, and can in fact be done at any time before October 1st. Note that this is must be done in single-user mode (i.e. you must be the only user of the MoneyWorks document). The steps are as follows:

It would pay to check the other tax rates that you use.

The effect of this is that transactions dated before 1 Oct 2010 will attract the Rate1 tax rate of 12.5%; transactions dated on or after the 1 Oct 2010 will attract the Rate2 rate of 15%.

You will need to run and finalise the GST Report for 30 Sept

Most people's GST cycle will end naturally on the 30 September so will be doing their GST at that time in any case. However if your GST cycle doesn't end then, you will need to run and finalise the GST report as at 30 September, which means you will have to change your GST Cycle date in MoneyWorks. Note that the existing Guide form is fine for this GST Cycle.

If your GST Cycle does not normally end on September 30:

Disclaimer: While we believe the following information to be correct at the time of writing, many of the final details of the GST changes are still unclear. You should therefore always check with your accountant about the details of the change; Cognito Software accepts no responsibility for any errors or omissions in this summary.

If you are on an Invoice basis for GST ...

... there appears to be nothing further that you need to do with regards to MoneyWorks.

If you are on a Payments basis for GST ...

... you will need to work out the GST adjustment on your outstanding debtors and creditors on the 30 September and claim (or pay) the difference between the old rate and the new rate on these. This is necessary because all subsequent payments/receipts on these invoices will be treated by the IRD as if they had 15% GST on them (even though the originating transaction only had 12.5%), so they are giving you this discrepancy in advance.

Use the Aged Debtors (and Aged Creditors) Report for this, setting the aging to be Calculated by Period, and run as at September 2010. Make sure that you have the Show GST option turned on. The report will list the total outstanding invoices and the GST on them as at the end of September.

You can only make the adjustment on invoices that are for taxable supplies made and received. If all your invoices are for taxable supplies, then you can base the adjustment on the gross amount outstanding at the end of September. However if not all invoices are for taxable supplies (e.g. you import or export), you should take the total GST amount and multiply it by 9 to give the gross of taxable supplies, and use this instead.

Now subtract the gross taxable debtors amount from the gross taxable creditors amount and multiply the result by 4 then divide that number by 207. This gives the GST adjustment on the outstanding invoices. If the amount is negative, it is treated as a credit and goes into Box 13, otherwise it goes into Box 9. If you have to use a transitional return (because your GST cycle does not end on 30 September), the adjustments will go into Box 13A and 9A respectively.

You should keep a copy of the report and workings that you make in case you get audited by the IRD.

Note that this assumes that you are using a GST rate of 12.5%. There are other rates that may be used (for example for rest homes); one assumes that a different multiplier than 4/207 will be used for these rates.

Subsequent returns on a payments basis

The IRD adjustment described above means that payments made (after 30 Sept) on invoices issued prior to 1st October are deemed to have 15% GST on them (even though they don't). Such payments will show up in the MoneyWorks GST Report in red, as MoneyWorks considers them anomalous, and for IRD purposes you cannot use the GST amount on the original invoice.

The new GST Guide report handles these transactions at the IRD expected rate of 15%. If for some reason you elect not to use the GST Guide, you will need to base your GST calculation on the gross amount given by the GST report, multiplying it by three and then dividing by 23.

Things to watch out for

Do not keep using the existing GST Guide

The existing GST Guide in MoneyWorks should used for the last tim for the 30 September GST cycle finalisation. For subsequent cycles it will give the wrong result, as it is based on dividing the gross by nine. A new GST Guide report for MoneyWorks 5 is available.

Recurring transactions

Transactions in MoneyWorks that are set to recur automatically will inherit the old 12.5% GST rate when they recur after 30 September, regardless of the rate settings in your tax table. You will need to inspect and manually adjust these by re-entering the Tax Code. This will force a recalculation of the total based on the Net amount of the transaction.

Duplicating Transactions

When you duplicate a transaction, you should check that the GST rate is correct on the new transaction. Changing the date of the duplicated transaction will update the GST rates (the GST rates are based on the transaction date, not the period).

Credits for goods at the old rate

Apparently credits (and bad debts) for goods/services provided at the old 12.5% rate will need to be credited at the old rate (but check with your accountant). You will therefore need to make a new Tax Code (GC) which has a rate of 12.5% and use this on such transactions. At this time it is not clear where the GST on such transactions will go on the GST Return.

Update your quotes and orders

Outstanding quotes and orders in MoneyWorks will have the 12.5% GST rate on them. To update this, simply change the date on each order to be on or after 1st October.

MoneyWorks and GST Changes FAQs

Will there be an update for MoneyWorks to handle the new GST Rates?

No update is required. MoneyWorks was designed for a GST environment. However the existing GST Guide will no longer function correctly. A new Guide will be made available to MoneyWorks 5 users.

What about older versions of MoneyWorks (version 4 and earlier)?

We build quality software, so no upgrade is required. However we will not be providing a new GST Guide for these older versions; instead you will need to manually adjust the figures from the GST Report.

But Rod Drury is reported as saying that all desktop software would need to be upgraded and would cost heaps?

Which just goes to show how little reliance you can place on any utterances from that quarter.

I've got MoneyWorks Cashbook which doesn't have the Aged Debtors/Creditors reports. How do I work out outstanding invoices?

MoneyWorks Cashbook (and its predecessor CashWorks) are cash only, and do not know anything about invoices. You will need to sit down and manually add up your outstanding invoices (or upgrade to Express and enter them into that).

What about the GST on layby items or finance charges?

These issues are best discussed with your accountant.

Who do I contact to get help on this GST increase?

If you are unsure how to handle the GST on certain transactions or types of transactions, you should talk to your accountant (or ring the IRD). If you know the specifics of what you need to do but are unsure of how to do it in MoneyWorks, see your MoneyWorks consultant or call the support line on 0900-55-444. But remember, the support line does not give accounting or GST advice, only how to do achieve things in MoneyWorks.