GST: the return built from your own transactions

What the GST screen does

Open GST and ByteBook shows the return for the period you choose, built from the transactions in your books. Nothing is typed in twice and nothing is estimated: every box is a sum of coded entries, and every figure can be traced back to the transactions that produced it.

The boxes you will meet:

Box	What it is
5	Total sales and income, including GST
6	Zero-rated supplies
9	GST collected on sales
11	Total purchases and expenses, including GST
13	GST credit on purchases
20	GST to pay

Box 5 includes income that carries no GST, such as interest, because the return asks for total sales and income. Box 9 is the GST itself. Keeping those two apart is the point of the box structure, and mixing them up is the most common GST error in small-business records.

Work out a period

1. Choose the period. ByteBook offers the cycles that match your filing frequency, and you can set any start and end date.
2. Press Recalculate. The boxes fill in from the ledger.
3. Read the Result: GST collected on sales less GST credits on purchases, which is box 20, the amount to pay.
4. Reconcile the period against the ledger before you go further. The GST reconciliation procedure checks that the GST in the return is the GST in the ledger, and that the control accounts agree with what has been filed.
5. Save this as a snapshot. The snapshot is a record of what you filed, at the date you worked it out, and it stays after the transactions move on.

Invoice basis and payments basis

The basis you chose when you set the business up decides which transactions fall inside a period:

• Invoice basis. GST is accounted for when the invoice is issued or received, whether or not the money has moved. A sale invoiced in March is in the March period even if the customer pays in May.
• Payments basis. GST is accounted for when money actually moves. The same March invoice belongs in the period the payment arrived.

Most small businesses can use the payments basis; larger ones cannot. The choice changes the figures in every period, and it is the reason two businesses with identical invoices can have different returns.

ByteBook's footer on the GST page states which basis the return was worked out on. Read it before you read the numbers; a figure without its basis is a figure you cannot check.

When a sale carries no GST

Not every sale is taxable. The landlord simulation earns exempt rent beside taxable supplies. Exempt income appears in box 5 as income, contributes nothing to box 9, and does not entitle the business to claim GST on costs that relate to it.

This is where a bookkeeping exercise becomes a tax question, and it is worth being plain about the limit: ByteBook adds up what you coded. Whether rent, a particular financial service or a going concern is taxable, zero-rated or exempt is a question about the specific supply, and Inland Revenue's own guidance is the authority for it. Getting the treatment wrong is easy to do and expensive to fix.

A note on income tax

GST is not income tax, and the two should never be mixed in your thinking. GST is a tax on the supply of goods and services, collected by the business on Inland Revenue's behalf. Income tax is a tax on profit. A GST return says nothing about whether the business made money.

For income tax, ByteBook prepares the working papers: Tax forms builds the IR3, IR10 and IR4 figures from the same ledger. Current tax is measured at the amount expected to be paid to the taxation authorities, using the tax rates and laws that have been enacted or substantively enacted by the reporting date NZ IAS 12.46.

Common mistakes

• Filing before every bank line is coded. The return is built from transactions. A line still waiting is a transaction the return has not seen.
• Recording a GST-inclusive figure as the GST amount. Box 9 is one-ninth of a GST-inclusive sale at 15%, and ByteBook works that split for you. Reading box 5 as though it were box 9 is the mistake to avoid.
• Filing without saving a snapshot. Then there is no record of what was filed, and the reconciliation has nothing to compare against.
• Treating a refund as negative sales in the wrong period. A credit note or a refund reverses the sale it corrects, and the period it lands in matters.