GST Tax Changes - What you Need to Know Part 2

This week we will address the following issues …

Work done in September, invoiced in October

Question
Lets assume that you have done work in September and through month end cut off etc, the invoices aren’t raised until Monday the 5th October, should these invoices be invoiced at 12.5% or invoiced at 15.0%.

Answer
All invoices issued on or after 1 October 2010, must be issued at 15.0%. The solution is to make sure all invoices for September are invoiced in September.

Insurance Claims
Mike is a registered electrical contractor, who pops into the pub for a beer on Friday 27 August. While in there someone breaks into his van and pinches some of his gear. He puts a claim in on Thursday the 2nd September and is paid out on Wednesday 13 October 2010. (Insurance company was a bit slow to pay out because of some past dubious claims).

Question
Should Mike pay GST on the money received at 12.5% or 15.0%

Answer
The time of supply is the day on which the payment is received from the insurance company and GST output tax must be accounted for in the period in which payment is received, so in this case Mike has to return GST based on 15.0% and not 12.5%.

Layby Sales

Sarah has a birthday on Thursday 2 September 2010 and decides to treat herself to a new laptop, which has layby terms available of four months. Sarah elects to pay:
• 25% now
• 25% on the 30th September
• 25% on the 31 October and
• 25% on the 30 November.
Question
As far as the October and November payments go, will Sarah pay GST at 12.5% or 15.0%?

Answer
With Layby sales, each transaction shall be treated for the purposes of the Layby Sales Act 1971 as a layby sale made at the time when the last of those agreements was made. So that means Sarah will have to pay the extra GST at 15.0% on the October and November sales.