Changing GST Basis in Infusion

Always check with an Accountant and to refer to the IRD website for information before changing your GST Basis

PAYMENTS to INVOICE Basis:

There are manual adjustments clients need to make to handle this.

So you need to be aware of what happens in the background within the software, and make appropriate adjustments based on that.

While they are on Payments Basis – the software only outputs records to GSTDET when a payment is made (so dollars coming in for a Customer payment, dollars going out for a Supplier payment and the same for Cashbook entries).

So at the end of the month all of the invoices that are outstanding for Customers and for Suppliers have not had the GST declared. When you convert to GST Invoice Basis (the software outputs records to GSTDET when an invoice is processed) so only NEW invoices that are processed are reported and it doesn’t matter what date they are dated – it will report any NEW invoices (Customers and Suppliers, plus Cashbook transactions)

SO whatever is showing as Outstanding in Customers and Suppliers at the time you change the GST setting hasn’t been declared and never will be declared for GST purposes so that has to be reported to IRD manually somehow.

INVOICE to PAYMENTS Basis:

By the end of the month all Customer and Supplier invoices and their GST content have been included in GSTDET and so declared to IRD.

When they subsequently PAY those same invoices the software will report them AGAIN so a manual adjustment has to be done in subsequent GST returns to remove the value of the payments received / made for invoices that were keyed in and dated prior the end of the Month.

So regardless of which way you are going you have to have an Aged Trial Balance for both Customers and Suppliers which lists all Invoices, etc that are outstanding at the end of the period. Then you make a manual adjustment either in the GST for that period (when going Payment to Invoice) or in subsequent periods when payments are made for invoices dated the month the GST was changed and earlier.

Unallocated Payments:

For Payments Basis

• The unallocated payment goes to the GST return
• and when the unallocated payment and the invoice are matched
• it does two more entries to the GST return - a positive and a negative in the income section.

If they have only done the unallocated payment at the time of making the swap to Invoice Basis

• the unallocated payment will be on their GST return

Then they change the basis to Invoice Basis

• As soon as they raise the invoice, that will also go to the GST return
• nothing will go to the GST return when they match the two together with a zero payment

BUT  at the time of the changeover

• When dealing with the GST that is outstanding on the Accounts Receivable and Accounts Payable reports, that is where your adjustment calculation should be / will be taking into account the unallocated payments.
• Most customers owe money for invoices that haven’t been paid, and where the GST hasn’t been reported to the IRD and never will, Hence the adjustment
• In this situation you have customers with a credit balance,  and this is where the GST has been reported and will be double reported to the IRD as soon as the invoice is raised
• So the adjustment that is done at the swap over time - has to be on the basis of the TOTAL outstanding (credits and debits) balance of the customers being reported as income..
• E.g if we think of only two customers - one owing money and one having an unallocated payment
• John owes 11500 - i.e. the GST content of 1500 has to be paid to IRD as an adjustment
• Bob has an unallocated payment credit for 115.00 - i.e. the gst of 15 will be double reported later when the invoice for 100+15 is raised
• So your adjustment must say 11500 minus 115 = total DR o/s balance of  11385.00 and therefore the GST adjustment to be paid is 1485.00    (or 1500-15)
• Just watch out for customers with non GST invoices, run an Aged Trial Balance with invoices to confirm if any exist, but I think the math will work out fine.

But always check with the IRD and your Accountant for the most accurate requirements.