We’ve had a number of nominations to our GST wall of Shame for electricity companies charging the new rate of GST on bills for power used in September and invoiced in early October.
This has to be unfair – right?
It certainly seems unfair to us, but we think that about the GST rise in general. And in this case, it’s the government’s new GST rules that are to blame. It’s not the fault of the electricity companies.
IRD rules say the new rate of 15% GST must apply to all invoices issued from October 1. Although your electricity was supplied to you in September, the law says the date of supply is the date of the invoice.
However, IRD have issued some special rules which mean an electricity supplier can choose to bill customers at 12.5% GST for September as long as they follow the guidelines below:
Paying your power, gas or telephone bill
Example
Kaye gets an invoice for her electricity bill for power used in the period up to 30 September. The new legislation allows a utility supplier, such as an electricity, gas or telephone supplier, to charge GST 12.5% for electricity used in the period up until 30 September. If the supplier chooses this option they need to ensure that:
-
the invoice was dated on or before 30 September 2010, and
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the invoice was issued by 11 October 2010, and
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payment for the supply would need to be due no later than 60 days from the invoice date.
If they don't opt to do that and issue an invoice to Kaye dated 15 October, then Kaye is liable to pay the 15% GST rate. The supplier must also account for GST at 15%.
If Kaye received an invoice dated 28 September and payment was due on 25 October, then GST would be at 12.5%.
More information
- Inland Revenue - www.ird.govt.nz
- GST Wall of Shame - the list of price increases submitted by our readers
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Wouldn't it be much easier if the power companies told customers to provide their own readings before September 30 to be charged at 12.5% GST? All the major companies offer this service.
The only major drawback of this is it could overload the Accounts department, and the fact you could read your meter wrong (especially older dial reading meters) and ending up getting an erroneous bill.
We have just received our ACC Year End Invoice for 2009/2010 covering the period 1 April 2009 to 31 March 2010 and it is charged at 15%!
Also the period from the 1 April 2010 until October 2010.
I have difficulty understanding why the revised amount for 2009 could not have been invoiced before Oct 1st instead of 13th October to give everybody a chance to pay.
The power companies aren't the only offenders here. Our Vodafone account (for connection/calls Sept. 2 - Oct. 1) was also taxed at 15%. Not that I'll be complaining to Vodafone though, as I'd already planned to go to 2 Degrees at the end of October.
I note that in the Dominion dated 14/10 on page A7 there is an article saying that an amendment in August allowed for GST provided before September 30 to be billed at 12.5% until October 11. In July Nova increased their Gas charges by 0.2772 cents per kWh (conversion factor and rate) on variable useage of Gas which increased the cost by almost $70 due to ETS and 'other' costs. In August Nova changed my billing date from 05/08-05/09 to 05/08-01/09 and they billed the entire month of September at 15% GST. This invoice was dated 04/10/10. I realise that they are entitled to do this but think they should be named as one of those not using the option to keep the GST at 12.5% for the month of September.
Our dairy company has paid us for milk supplied in September and paid in October at the new rate of 15%
By pre-paying all you have done is put your account in credit. And so if your power company invoices you in October for September's power usage at the 15 percent new GST rate then the total amount including the 15 percent GST would be deducted from your credit. And so on for all the months until your credit runs out. So pre-payment will save you nothing.
It's completely the normal thing for GST to be as at the invoice date, except for very small businesses that work on a cash basis.
I've taken advantage of this and pre-purchased almost all my expected electricity usage for October through to April before the GST rise.
Funny thing though Bruce.. if you put it on your visa, you'll be paying some 22% to save 2.5%.. and even if you just paid cash, that is money you could have put against your mortgage and saved you average 8%??