Tax invoices

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9th February, 2023

Tax invoice rules are changing this EOFY

The Government has introduced new laws regarding GST rules for invoicing, to come into effect from the beginning of April this year. Here’s what you need to know.

As of 1 April 2023, businesses will no longer be required to use tax invoices and instead will be required to maintain records regarding ‘taxable supply information’.

The Inland Revenue Department (IRD) wants to be clear that how you calculate GST isn’t changing, simply how you store and communicate the related information is.

According to the IRD website:

‘You’ll no longer need to keep this information in a single physical document, such as a tax invoice, credit note, or debit note. Your transaction records, accounting systems and contractual documents may, in combination, contain all the information you need to support the figures in your GST returns.’


Why the shift away from tax invoices?


The Government’s decision to move away from tax invoices can be seen as part of a bigger trend to keep up with the pace of change in technology.

Simply put, the way we transact has evolved quickly over the past few decades and, at a certain point, using traditional data capture methods is becoming burdensome for businesses, their advisors and the IRD.


What is the alternative to tax invoices?


Instead of tax invoices, the IRD now expects businesses to maintain taxable supply information — what this specifically entails will depend on the value and type of goods and services supplied.

So, rather than this information being formalised into any single document as they have been, a combination of transaction records, accounting software and contractual documents may include all the details you need to justify your GST returns.

The MYOB business management system fulfils this purpose nicely, but there are other tools that can make this process even easier — namely, eInvoicing.


What is eInvoicing?


eInvoicing is a fully online alternative to traditional invoices, allowing a faster and more secure exchange of money and transaction data between businesses. And it’s starting to take off across the country.

In fact, there are already more than 6,500 businesses registered to receive eInvoices, including 17 government agencies.

With eInvoicing, a supplier’s financial system generates an invoice for the buyer and the invoice information passes through the eInvoicing network, where it validates information like the NZ Business Number (NZBN) to ensure the eInvoice is directed to the right buyer, and also where it’s reconciled against the purchase details.


Benefits of switching to eInvoicing


There are some clear benefits to adopting eInvoicing, which can be more or less obvious depending on the nature and size of your business, as well as how many invoices you dispatch to customers or clients or receive from suppliers.

The advantages of eInvoicing for businesses include:

Speed and efficiency – the instant, secure dispatch of sales invoices available to any business over a secure connection will reduce administration costs and should speed up payment times

Streamlined recordkeeping – eInvoicing’s a great way of storing and filing supplier invoices without the need to upload or scan to your accounting software, especially as currently, some arrive by email, some physically and others require downloading

Automated admin – eInvoicing automatically sorts supplier invoices for payment in an organised way, giving you the ability to manage payments and get your suppliers paid in a timely fashion. It’s no secret businesses that pay creditors regularly and on time tend to be more successful

No more double handling GST data – If you’re managing a business that needs to enter supplier invoices into your accounting software, eInvoicing will be hugely beneficial, saving many hours of tedious work. The days of trying to work out your Accounts Payable at the end of each period will be behind you.

The New Zealand government has more on the benefits of eInvoicing via their website on the topic. In particular, the benefits calculator is useful (although, they use an example of 10,000 supplier invoices received per year, which is obviously on the high side for most businesses in New Zealand).


How to make the switch to eInvoicing easier


eInvoicing is not mandatory, which means for now it’s up to each business operator to decide whether or not to begin using it.

Without a mandate, we’re beginnng to move into a hybrid environment whereby some business will issue a mix of traditional sales invoices and eInvoices. Business operators need to be mindful of the complications this may cause, and develop processes to avoid them.

Here’s a list of potential issues you might face as tax invoices are phased out:

Visibility problems – To ensure early payment, you want your sales invoices seen by the person paying them in a timely fashion. Regardless of your invoicing method, make certain they’re clearly visible to the end payer

Mixed adoption and application – Many small businesses aren’t working on an invoice basis for GST and may not be obliged to enter supplier invoices into their accounting software for recordkeeping purposes, so you want to make sure your invoicing method is appropriate for each of your customers

Heads in the cloud – New, online platforms like MYOB and eInvoicing enable you to store and manage data purely online, but that doesn’t absolve business operators from their obligation to maintain good records at all times. Regardless of whether your business situation changes and you stop paying for a subscription, you’ll want to make certain you acquire all necessary records should the IRD come knocking one day

Risk of errors going unnoticed – If you don’t set up processes for validating the details of incoming invoices, the risk of error and even fraud begins to creep in. In theory, this is no different for eInvoices, but in a hybrid invoicing environment we’ll need to be even more vigilant to avoid these issues


How to get started with eInvoicing


If it sounds like eInvoicing is for you, it’s easy to get going especially if you’re already using online accounting software. All you need do is register to receive the eInvoices and change a few settings in order to start sending them.

Those online accounting features including eInvoicing, online invoice payments and much more is already available within the MYOB business management platform. Once you’re set up, anyone who can currently create invoices in MYOB will be able to send eInvoices directly from the platform and automatically keep track of their status.

For further resources on eInvoicing, visit the Government website and read some of MYOB’s previous articles on the topic.

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