Change your GST basis from payments to invoice

This help offers a suggested approach to changing your GST basis in Xero from payments to invoice basis. We recommend consulting 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

  1. 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 advised by Inland Revenue is 31 July 2016.
  2. Set a Lock Date at 31 July 2016.
  3. Run the Aged Payables report and the Aged Receivables report at 31 July 2016 and calculate the GST portion on outstanding invoices and expense claims. These figures contribute to your GST calculation adjustment.

    You may need to consult your accountant or bookkeeper on how to handle outstanding payables, receivables and expenses where 'No GST' has been applied.

  4. 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 debtors is higher than GST on creditors
    • Box 13: If GST on creditors is higher than GST on debtors

File the return

  1. Ensure all other transactions on the GST Audit report and adjustments are correct and complete.
  2. Finalise your 31 July 2016 GST return in Xero. This doesn't file the return with Inland Revenue.
  3. File the return with Inland Revenue.
  4. 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 in Xero (period ending 31 July 2016) under Payments Basis.
  5. You can now make the change in Xero to calculate GST on an invoice basis:
    • Click Settings, then select General Settings.
    • Under Organisation, click Financial Settings.

      Switching to Invoice Basis in Organisation Settings.

    • Under GST Basis, select Invoice Basis from the list.
    • Click Save to complete.

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