GST invoices and receipts
From 1 October you'll need to be able to issue invoices and account for GST at both the 12.5% and 15% rates of GST.
- What GST rate should be on a tax invoice?
- Checking that the correct GST rate is on a tax invoice
- Claiming tax invoices dated prior to the rate change which are received after 1 October
- Price increases on existing agreements or contracts to reflect GST rate increase
- How to account for GST on employee reimbursements after 1 October for an expense incurred before 1 October.
What GST rate should be on a tax invoice?
The GST rate on a tax invoice must be the rate that applied on the day the supply took place, according to the time of supply rule.
The time of supply is when the supplier issues an invoice or receives a payment, whichever happens first.
Use the time of supply rule to determine what rate of GST should be included on a tax invoice. This will not necessarily be when the goods were delivered or when the service was provided.
If the supply took place on or after 1 October 2010 then the tax invoice must include GST at the rate of 15%.
However, a special transitional rule may be used for goods and services that had been supplied on or before 30 September, but not invoiced until after 1 October.
Technically, the new GST rate, 15%, should be used. A special transitional rule enables businesses to issue invoices for pre 1 October 2010 supplies for the first 11 days of October and use the old GST rate of 12.5%. To use this rule that invoice must be dated 30 September 2010, payment must be due within 60 days from that date, and the supplier is required to include the invoice in their GST return covering 30 September.
Example 1
Vicki supplies 200 litres of paint to a trade customer on 16 September 2010 and issues them an invoice with the goods. The invoice is due to be paid by 20 October 2010. Vicki will include GST at the rate of 12.5% on the tax invoice, even though payment won't be received until after 1 October 2010.
Example 2
Carl’s Cafe normally provides only till receipts rather than tax invoices when he makes a sale (because most of his sales are below $50 or to non-GST registered customers).
On November 14 2010, however, a customer asks Carl for a tax invoice for a business lunch purchased and paid for on 28 August. Carl needs to use the GST rate of 12.5% on the tax invoice as that was when the supply took place.
Example 3
Tim the Blocklayer does work does work for a client during September. Tim normally issues his invoices for each month on the Sunday of the first weekend after the end of each month. On 3 October Tim issues the invoices for all the work he has completed during September. Payment will be due on 20th of October. Tim can charge his clients GST at 12.5%, but he must include those invoices in his GST return covering 30 September. (Note, if Tim uses the payments basis of accounting, he will include his September invoices in his debtors as at 30 September and include them in his GST rate change adjustment calculation sheet (GST105)).
Note
For some special supplies the time of supply may be different from the normal rule
Checking that the correct GST rate is on a tax invoice
If you claim input tax deductions, you'll need to ensure the correct rate of GST is shown on the tax invoice used as the basis for your claim.
Check the invoice, and your own business records, to find out the time of supply that should apply to the invoice.
If you made a payment or paid a deposit before 1 October 2010 then the tax invoice will show the GST rate of 12.5%, even if it was issued after 1 October 2010.
A tax invoice issued after 1 October 2010 can also include GST at the rate of 12.5% if it is advising of a reduction in price of a purchase originally invoiced at the 12.5% GST rate.
If you're unsure if a tax invoice is showing the correct rate of GST, contact the supplier. If the incorrect GST rate is showing you should ask the supplier to issue a correct tax invoice.
It's likely that you'll receive some tax invoices for goods and services after 1 October, which will be at the old GST rate of 12.5%. Your accounts payable system will need to be able to account for GST at 12.5% and not 15% on these tax invoices.
If you receive a tax invoice at 12.5% after you've closed off your GST return, you can still make a claim for this expense.
Claiming tax invoices dated prior to the rate change which are received after 1 October
If a tax invoice is received after 1 October for goods or services that were supplied before the rate change, the date on the tax invoice generally determines the GST rate that can be claimed. If the invoice is dated on or before 30 September, the GST is at 12.5%.
A claim of the GST on the goods or services at 12.5% can be made as an adjustment in Box 13 of the return - only the GST component of the transaction needs to be added to the return. This process also applies to the late claim of GST on supplies at the 12.5% rate.
A claim of the GST on the goods or services at 15% can be made in the usual manner on the GST return.
Note
If a tax invoice wasn’t received before the GST rate change adjustment was calculated then it wouldn’t have been included in your "qualifying supplies." As it was not included in your GST rate change adjustment the invoice requires an adjustment when the GST is claimed, rather than simply being entered as an expense in the return in which the claim is made.
Example
Company B receives an invoice from company A on the 10th of October showing a GST rate of 12.5%.
Company B returns their GST every six months (October to March and April to September) using the payments accounting basis. As the invoice was not received before 30 September 2010, the transaction cannot be included in their GST rate change adjustment calculation sheet.
Company B pays the company A on the 5th of November 2010 and will need to include the transaction on their GST return covering November 2010. They will however have to make an adjustment on their return for the supplies issued at 12.5% rate. The adjustments will show on the return in Box 13.
Price increases on existing agreements or contracts to reflect GST rate increase
The GST Act allows a supplier to increase their prices on existing agreements or contracts to compensate for the associated increase in GST (ie 2.5%), for example:
- car parking contracts
- gym contracts.
Example
David enters an agreement on 1 June 2010 for monthly car parking at a set fee of $120 GST-inclusive, payable on the 20th of each month.
From 1 October 2010 the GST rate of 15% will apply. The car parking company advises David that they will increase the fee by the increase in GST.
The new monthly amount David will need to pay is $122.67.
How to account for GST on employee reimbursements after 1 October for an expense that was incurred before 1 October.
If goods or services were used by an employee in the course of their employers taxable activity, the GST on the transaction can be claimed by the employer as long as they hold a valid tax invoice. The general time of supply rule applies in these circumstances.
Employers will need to make a late claim adjustment for the GST for an tax invoice issued at 12.5% but not reimbursed or accounted for until after 1 October. Account for the GST at 12.5% as an adjustment in the period the reimbursement is paid.
Example
Glen pays for petrol in the company car while on business travel for work on 3 September 2010 and keeps the tax invoice of the transaction so he can be reimbursed.
He misplaces the invoice when he gets back to the office but finds it again and submits the claim on 30 October 2010. Glen is reimbursed on 5 November 2010.
Glen’s employer will need to claim the transaction as a late claim. They make an adjustment for the claim on their GST return which covers the 30 November 2010 period.
Date published: 28 Oct 2010
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