THE NEW GST AND PROVISIONAL TAX RETURN, GST METHODS AND DUE DATES, GST LATE FILING PENALTIES

 

THE NEW GST AND PROVISIONAL TAX RETURN

From the start of the 2008/09 tax year, IRD will be sending out the new GST and Provisional Tax Return (GST 103).  The GST 103 combines payment of GST and Provisional Tax onto one return.  It has been developed as a result of aligning the GST and Provisional Tax due dates.

Key Features of the GST 103

There are eight versions of the GST 103, tailored to taxpayer’ individual circumstances, and only including the fields they need to complete.   The version taxpayers will receive depends on their balance date, GST filing frequency, if they use the ratio method to calculate their provisional tax payments and whether they file GST Returns for more than one location or branch.   There is also a non-tailored GST 103 version which can be downloaded from www.ird.govt.nz.

Who will Receive the GST 103?

Taxpayers will receive the GST 103 when they have a  GST payment due, regardless of whether a provisional tax payment is due for a particular period or not.   As long as they remain registered for GST and liable for provisional tax, they’ll continue to receive the GST 103 from IRD.   However, if they’re no longer for provisional tax (as a result of their residual income tax falling below $2500) IRD will send out the GST 101.   The GST 103 should be received around the same time as the current GST 101, which is near the end of the taxable period for which the return applies.

 

GST DUE DATES AND THE NUMBER OF PAYMENTS YOU NEED TO MAKE

GST periods haven’t changed at all- only the due date you need to file and pay your GST has changed. This means that you’ll still continue to pay your GST the same number of times each year you have in the past.  If you file your GST Returns every two months, return dates are as follows:

Two Monthly GST Period ends on the last day of

Under the new due dates, your GST Returns and payments are due on:

January

28 February

March

7 May

May

28 June

July

28 August

September

28 October

November

15 January

You should refer to the GST taxable period and the GST date printed on the GST Return that IRD send to you.

 

GST RETURNS AND LATE FILING FEES

A late filing fee is to be charged on late filing of GST Returns from 1 April 2008 .  This is $250 for filing a GST Return late where the taxpayer is invoice basis registered and $50 where the taxpayer is payments basis registered.

So do remember to file your GST Return by due date, even if it is a Nil Return.

 

CHANGE OF DUE DATES FOR PROVISIONAL TAX INSTALMENTS

The dates for your provisional tax instalments are changing from the beginning of the 2008-2009 and are based on your income tax balance date.  They will be the same as to due dates for GST so that businesses only need to file one return and  make one payment for both taxes

Whether you’re registered for GST or not, you’ll benefit from the changes as you’ll have more time to pay your provisional tax instalments

The number of provisional tax instalments will depend on the option you use to calculate your provisional tax payments and your GST filing frequency, (if you have one)

·          If you pay GST six monthly you’ll need to make two provisional tax instalments

·          If you use the ratio option, you’ll make six provisional instalments

·          Everyone else will make three provisional tax instalments

 

The new provisional tax due dates will be:

 

31 MARCH BALANCE DATE

 

NON- STANDARD BALANCE DATE

If three instalments are due

·          28 August

·          15 January

·          7 May

The 28th day of the 5th, 9th and 13th months after your balance date ***

If two instalments are due

 

·          28 October

·          7 May

The 28th day of the 7th and 13th months after your balance date ***

If six instalments are due

·          28 June

·          28 August

·          28 October

·          15 January

·          28 February

·          7 May

The 28th day of the 3rd, 5th, 7th, 9th, 11th and 13th months after your balance date   ***

 

 

***   If this falls in December or April it is due 15th January or 7th  May respectively.

 

There is no change to end of year due dates.

 

RATIO METHOD OF GST

To use the GST ratio method, you will need to make an election to IRD before the beginning of the year.  For example, an election must be made before 1 April 2008 for the 2009 tax year.  Once you choose the ratio method, the IRD will calculate the ratio and let you know.  The GST ratio is calculated on the percentage of Residual Income Tax (RIT) for the previous tax year, divided by the total sal es for GST for the same year.   You only need to multiply your GST sal es for every two months by the ratio to get your provisional tax payment amount.   Applying the ratio method correctly will “safe harbour” you from being charged use of money interest even if your actual tax liability is bigger than the provisional tax that you have paid.   The ratio can be changed by IRD at anytime so care will be required as penalties apply if the wrong ratio is used.

 

The ratio method applies to taxpayers who:

·          have operated a business and have been GST registered for two full tax years

·          the RIT is more than $2,500 but less than $150,000

·          file their GST Returns monthly or two monthly

·          have made an election (in writing or by telephone call) by the first day of the income year ( 1 April 2008 for 2008-09 year for taxpayers with a 31 March balance date)

A taxpayer may fall out of the ratio method if:

·          GST registration ceases

·          a GST Return is overdue by 60 days

·          the taxpayer ceases to be a provisional taxpayer (e.g. makes a loss) and RIT is less than $2500

·          the taxpayer changes to six monthly filing.

Advantages of the ratio method include:

·          provisional tax is paid in line with sal es which will assist cashflow particularly for seasonal businesses and businesses with variable incomes during the year

·          the dreaded use of money will not apply to taxpayers who qualify for the method

Disadvantages of the ratio method include:

·          missed ratio changes could invoke penalties

·          falling out could expose the taxpayer to use of money interest

·          does not apply to shareholder employees

·          does not apply to partners in a partnership

·          asset sal es could mean that too much tax is paid and use of money interest is not receivable either.

·          Six payments of provisional tax are payable during the year instead of the previous three.

 

 

 

 

 

 

 

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