GST - Getting your system ready for 1 April 2023
Tax Alert - July 2022
By Jeanne du Buisson & Haidee Watkin
Organisations have less than a year to adapt and change finance systems to comply with some fundamental GST changes in respect of how (and what) supply information should be shared and retained. These changes are the first step in modernising some arguably outdated GST rules and proposes to change the approach to ‘tax invoices’ and moves the GST system into the 21st century. Although these changes are built on existing requirements, and organisations can choose to maintain the ‘status quo’ in issuance and receipt of something similar to a traditional tax invoice post 1 April 2023, key stakeholders may move with the legislation and organisations need to be ready to deal with receiving and issuing different types of ‘taxable supply information’.
These changes may have been designed to provide organisations a greater degree of flexibility with interactions with suppliers and customers, but at the outset can provide additional complexity within finance systems, especially systems that were built around the issuance and collection of ‘valid tax invoices’.
So, what are the key invoicing changes?
- Terminology is changing. ‘Tax invoices’ become ‘taxable supply information’; ‘debit notes’ and ‘credit notes’ become ‘supply correction information’, and ‘buyer-created tax invoices’ become ‘buyer created taxable supply information’.
- The current requirements to ‘issue and hold’ a physical tax invoice, debit note and credit note have been maintained but are now no longer mandatory. The ‘tax invoice’ provisions have been extended to allow provision of information in relation to the supply (taxable supply information) or amendment to the supply (supply correction information). We summarise the current tax invoice and future taxable supply information (TSI) requirements in the table below.
- The requirement to hold a ‘tax invoice’ to claim an input tax deduction has been replaced with a requirement to ‘hold’ business records showing that GST has been borne on the supply.
- The requirement to hold records of specified information in relation to taxable supplies is extended to both suppliers and customers.
- The low-value threshold is increasing from $50 to $200, where limited taxable supply information is needed.
- The change in buyer-created tax invoices (buyer-created taxable supply information), with the removal of the requirement to obtain Inland Revenue approval to issue these documents; and this being replaced with an agreement in writing between the parties to evidence the use of self-billing.
A good portion of the above changes have been delayed to 1 April 2023 to give organisations time to ensure systems and processes are ready to deal with changes.
Are your systems ready?
These changes can have wide ranging effects on organisations' systems, and it is a good time to review system capabilities to ensure your system is able to send/receive taxable supply information in ‘non-standard format’ and hold new information requirements. Some key system considerations are:
- Consideration to adjunct systems such as invoice scanning software. Generally, these systems check parameters to accept/reject invoices i.e., must say ‘tax invoice’ – which will no longer be a requirement.
- Consideration to employee reimbursement, credit card reconciliation and wider finance system abilities to process non standard ‘taxable supply information’ and increases to the low-value threshold.
- Capabilities of supplier and customer master databases to hold key information such as IRD number and address, that may no longer be supplied on the data feed (taxable supply information).
- Capturing the approval from other parties to issue buyer-created taxable supply information, which is readily accessible should the entity be asked by Inland Revenue. When issuing buyer-created taxable supply information, systems should ensure that only one ‘tax invoice’ (taxable supply information) per transaction is in circulation.
- System readiness for future movement towards e-invoicing.
Beyond being systems ready, organisations also need to consider the other impacts of changes in the GST legislation. Now is a good time to ensure finance staff are trained on the new taxable supply requirements and review internal policies, procedures, process notes and general frequently asked questions, along with general terms of trade to ensure they are consistent with GST changes. Doing a GST review now can assist with preparedness for 1 April 2023. Contact your usual Deloitte advisor to organise a GST review or discuss any queries you may have about the GST changes.
July 2022 - Tax Alerts