Businesses found to be avoiding the higher tax rate could end up on criminal charges in serious cases.
WHK tax principal Jarod Chisholm and Deloitte Dunedin tax partner Peter Truman highlighted to the Otago Daily Times yesterday areas of concern they were dealing with on behalf of clients.
For Mr Chisholm, the "time of supply" has proved a major issue when educating clients about the change in GST from 12.5% to 15%.
"We are aware that a number of taxpayers have gone to the IRD to determine how the GST rate should be dealt with in their business and have been advised that `time of supply' determines the applicable GST rate."
Generally, where "time of supply" was before the rate change, GST would be applied at 12.5%.
When it occurred after September 30, GST would be applied at 15%.
Time of supply was generally triggered at the issue of an invoice or the receipt of payment - whether in part or full, he said.
Many businesses were using generic advice without realising some of it was being wrongly applied to their enterprises.
One of the issues arising was taxpayers creating artificial transactions to trigger time of supply early, thereby reducing the GST applicable to a transaction, Mr Chisholm said.
An example would be a construction company invoicing for 100% of the construction cost of a house when only part-way through construction.
"This could be deemed avoidance, as the invoice issued will be for work yet to be completed."
A further example would be someone paying a $100 deposit for a section with the rest to be paid next year.
If the invoice included GST at 12.5%, it could be seen as avoidance.
In the past, if businesses sent out early invoices to help cashflow, the IRD accepted that because it got its money early.
However, from October 1 the IRD would be missing out on the increased GST.
"We are warning clients to make it realistic.
"If it is borderline, then maybe the IRD won't pick it up, but it is the big ones people are focusing on to try and save money.
"People are asking for trouble.
"If there is avoidance, the IRD will pick the bigger ones to make a point," Mr Chisholm said.
Penalties which might be assessed against GST manipulation could be up to 150% of the tax shortfall and a criminal conviction in the most extreme circumstances.
Mr Truman said most large businesses had project teams working through the implications of the changes and were on top of the issues.
One area that was overlooked was the impact of the GST rate change in spreadsheets outside of the core accounting system, such as a pricing model.
Those needed to be reviewed and updated.
Many smaller businesses that used MYOB, Quickbooks, Cashmanager, Banklink, Xero and other small business software were assuming the rate change fixes would be dealt with by software suppliers.
"It is still important that businesses understand the impact of the rate change so they can determine whether the output from the system is reasonable," he said.
As October 1 drew near, there had been an increased level of inquiry from clients about whether GST applied at 12.5% or 15% on large dollar value transactions, especially land transactions.
