Change your GST basis from invoice to payments
This help offers a suggested approach to changing your GST basis in Xero from invoice to payments basis. We recommend consulting with your accountant or bookkeeper as there are implications when changing your GST basis. You will also need to ensure you comply with all of Inland Revenue's requirements before you get started.
Apply for basis change
The Inland Revenue website explains the requirements and process for changing your GST basis.
Calculate the adjustment
- Ensure all transactions entered into Xero are correct and complete up to the end of the last period before basis change. Let's assume for this example that the date of changeover is 30 September 2016.
- Set a lock date at 30 September 2016.
- Run the Aged Payables report and the Aged Receivables report at 30 September 2016 and calculate the GST portion on outstanding bills, invoices and expense claims. These figures contribute to your GST calculation adjustment.
- Enter the calculation adjustments for outstanding debtors and creditors in your GST adjustments calculation sheet (IR372). Then include this adjustment in the corresponding box on your Xero GST return.
- Box 9: If GST on creditors is higher than GST on debtors
- Box 13: If GST on debtors is higher than GST on creditors
File the return
- Ensure all other transactions on the GST Audit report and adjustments are correct and complete.
- Finalise your 30 September 2016 GST return in Xero. This doesn't file the return with Inland Revenue.
- File the return with Inland Revenue.
- The GST guide indicates: 'If you change your accounting basis, you must make adjustments in your last return before you make that change'. Make sure you have completed the correct adjustment for your final GST return (period ending 30 September 2016) in Xero under Invoice Basis.
- You can now make the change in Xero to calculate GST on a payments basis:
Click Settings, then select General Settings.
Under Organisation, click Financial Settings.
Under GST Basis, select Payments Basis from the list.
Click Save to complete.