The future of GST - taxable supply information
Tax Alert - September 2022
By Jeanne du Buisson & Haidee Watkin
The latest Tax Bill includes a number of further remedial tidy-ups to the major changes around GST tax invoicing that were in the Taxation (Annual Rates for 2021-22, GST and Remedial Matters) Bill and which largely come into effect on 1 April 2023. We've set out below the updated position that will apply from 1 April 2023, assuming, of course, that the updates contained in the latest Bill are enacted as proposed. Deloitte will be making submissions to try and make a number of the changes more practical. This area is still a bit of a moveable feast, and it will be important that businesses ensure they are aware of the final position before the new rules apply on 1 April 2023.
Moving from Tax Invoices to Taxable Supply Information
Since the inception of the Goods and Service Tax in 1986, despite significant changes in the business environment, the rules governing tax invoices have largely remained unchanged. From 1 April 2023, the current tax invoice requirements are being relaxed and new ‘taxable supply information’ is being introduced. Current requirements to ‘issue and hold’ a valid tax invoice to claim an input tax deduction will no longer be mandatory. The new ‘taxable supply information’ requirements will operate in parallel with the current ‘tax invoice’ requirements, thus giving organisations the flexibility to choose to maintain the ‘status quo’ or adopt the new requirements. These changes are the first step in the movement towards modernising and future-proofing GST information requirements, particularly as e-invoicing becomes more prevalent.
So, what is taxable supply information?
Taxable supply information is an aggregate of supply information collected from a variety of sources, that organisations are required to hold in order to claim input tax deductions or issue so the other party can claim a deduction.
The new requirements
The existing mandatory 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. These information requirements no longer need to be contained in a tax invoice and can be contained in a variety of business records such as documents containing contractual information, systems and databases holding key supplier/customer information or sales and purchasing documentation issued. As an aggregate, these documents may already exist in organisations' systems and provided they met the minimum information requirements, become taxable supply information.
Operationally how will taxable supply information work?
An organisation's requirement to ‘hold’ business records now not only extends to customers but also to suppliers as well. Taxable supply information will enable organisations a greater degree of flexibility in the form and type of taxable supply information that they provided to customers and receive from suppliers. This will allow organisations to collate taxable supply information such as customer name, physical or mailing address, email address, phone number, website and/or NZBN, and store them in formats such as:
- Customer and supplier master databases; and/or
- Customer and supplier onboarding documentation; and/or
- Supply or other contractual agreements with customers and suppliers.
Provided this information is held by the organisation, when a taxable supply is made or received, only supply particulars that change, such as a description of goods, consideration and GST inclusive or exclusive need to be disclosed. As taxable supply information does not have a prescribed format, this gives organisations the flexibility to issue the invoice particulars through a variety of mediums such as a physical invoice, a data file, e-Invoicing, or an upload to an app.
Organisations may choose to maintain the ‘status quo’ on the issuance of tax invoices, which is entirely acceptable post-1 April 2023, however, key suppliers may move to the new taxable supply information requirements, so organisations need to prepare accounts payable systems to ‘deal’ with new types of taxable supply information that won’t look like a traditional tax invoice.
Taxable supply information from a data integrity point of view
Conceptually a move away from the rigidity of ‘valid tax invoices’, provides organisations with a greater degree of flexibility in interactions with suppliers and customers. However, from a practical point of view, financial systems have been built around the fundamental concept of issuance and collection of valid tax invoices and change at the outset can be complex and time-consuming. In moving to a reliance on business systems it is key that organisations are thinking about data integrity controls built around valid tax invoices and ensuring they are updated to accommodate new taxable supply information requirements, especially if any invoice scanning software is utilised. As organisations move to adopt these new information requirements there will need to consider a shift in focus on GST compliance testing from valid invoice checks to supplier/customer maintenance and validity checks, as well as integrity checks on electronic files.
This is a snapshot of the taxable supply information changes, navigating these new requirements can be difficult and often complex. Now is a good time to get Deloitte to undertake a GST review to assist with preparedness for 1 April 2023 and in addition consider data analytics to assess data validity before adopting the new taxable supply information requirements. For more information contact your usual Deloitte advisor.
September 2022 - Tax Alerts
- Dual resident companies get some relief under proposed tax changes but watch out! There may also be tax to pay!
- Insights from Inland Revenue’s International Questionnaire campaign. Are you in the expected normal range?