On 1 October 2010, the Government has legislated a 2.5% rise in GST to take effect.  That means New Zealand businesses don't have long to make the mental and business system adaptations needed, to achieve a trouble-free transition into the new regime.

The shift from a 12.5% to 15% rate is the biggest change in GST for more than 20 years. So successfully navigating this transition means getting to grip with the details. You'll need to make some decisions around how the increase will be accommodated in your pricing structures - whether they're carried, passed on or a mix of both. Changes to office and accounting systems will not only have to reflect the adjusted rate, but handle what could be a tricky transition period.

There are some questions you'll need to ask yourself. Like how will contracts spanning the two GST regimes be managed? Will your business need additional resources to cope with the required changes? How will you best cope with the spike or drop in market demand these could create?

Inevitably there will be potential fishhooks in the transition process. For example, businesses could be left out of pocket on transactions priced out under the existing regime, but delivered under the new. For instance, inbound tourist operators could lose out on existing contracts with overseas agencies.

So how best to tackle the changes?

First, don't panic. Approach the changes positively and follow some key steps.

Here are our top tips:

BE PROACTIVE

Identify which aspects of the change are going to impact most on your business and put strategies in place to deal with these.  Be aware of the scale of extra activity involved in the changes and then resource accordingly. Retailers in particular will have a lot of price tag adjustment to do on September 30 - unless they can come up with a viable dual tagging system. The last GST rise in 1989 prompted a shopping surge - particularly for pricier items.  That has implications for staffing levels and cashflow.

GET SYSTEMS SORTED ASAP

Big companies with their own in-house expertise are better placed for a smooth adjustment to the new regime, but small to medium sized businesses will need to be proactive and seek help from key suppliers and advisors. If you're running proprietary software, you can go to your vendor to get the necessary software adjustments or updates.  MYOB general manager Julian Smith says the transition should be straightforward for businesses using its accounting solutions. But he warns: "October 1 brings a number of significant tax changes, so it's important to keep your details up-to-date with accounting systems like MYOB and business advisors like Westpac. That way they can keep you in touch with everything you need to know to avoid being out of pocket."

COMMUNICATE WITH YOUR CUSTOMERS

While most consumers are aware GST is rising by 2.5%, price hikes can still come as an unpleasant shock. It’s best to prepare people in advance, provide clear information as to how pricing on your
goods or services will be affected, and promote positive angles.

ACCESS GOOD ADVICE

The Government has set up a GST Advisory Panel to act as an intermediary between Inland Revenue and business people with GST queries or problems. Its comments and clarifications - particularly on how to deal with supplies of goods and services that span 1 October - can be found at www.gstadvisory.govt.nz. The site includes a submission form for specific enquiries. More information can be found
at www.taxpolicy.ird.govt.nz and on the websites of most major accounting firms (for example, KPMG).

(SOURCE: Westpac, Good Business, 3rd Quarter 2010, page 4-5) Good Business 1.04 Mb