New Zealand Goods and Services Tax Legislation
The mid-year edition of New Zealand Goods and Services Tax Legislation fully consolidates the Goods and Services Tax Act 1985 to 1 April 2017, taking in the changes made by the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017.
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Overview of recent amendments:
The Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (No 14 of 2017) was passed into law at the end of March 2017.
A brief summary of the main amendments to the Goods and Services Tax Act 1985 is set out below.
Adjustments and exported goods
Section 21(2)(ab) has been inserted to exempt a non-resident who incurs GST under s 12(1), when they import goods for home consumption, from the need to make adjustments to a claimed deduction. The exception applies when the non-resident has exported the goods in or before the adjustment period, and has disposed of them overseas or holds them overseas. This effectively allows the non-resident to retain the claimed GST. The amendment is effective on 30 March 2017.
Agents acting for purchasers
Section 60(2B) has been inserted to allow agents acting on behalf of purchasers and principals to opt out of the agency rules for a supply made to the principal. Opting out will allow the parties to account for GST as though the supply was two supplies between the supplier and the agent, and between the agent and principal. The agent and principal will need to record their agreement in a document to treat a supply, or class of supplies, in this way. The amendment is effective on 30 March 2017.
Section 26(4) has also been inserted, effective 30 March 2017, to prevent a bad debt deduction being claimed for the supply by an agent to a principal.
Agreed methods of apportionment and adjustment
Sections 20(3EB) and 21(4B) have been inserted to enable businesses with a turnover exceeding $24 million to apply alternative methods of apportioning and making adjustments to input tax deductions to address high compliance costs some businesses experience in applying the legislated approach. The method will either be agreed between the Commissioner and the business, or by an industry association. Agreed methods must be fair and reasonable and take into consideration the outcomes that could be reached if the existing apportionment and adjustment rules were applied.
The amendments are effective on 30 March 2017.
Section 21HC has been amended to alter the application date of the “savings” provision for bodies corporate.
Persons treated as registered: Amended s 54B(1)(b) allows a non-resident who only has a connection with New Zealand as an importer to register if the amount of their first input tax credit claim is likely to be more than $500 or the person is likely to be liable for Customs GST costs levied under s 12(1) in relation to the importation of goods that are received by another person or that person delivers to another person. The amendment is effective on 1 October 2016.
Requirements for registration for certain non-resident suppliers: Section 54B(1)(d) has been amended to allow non-residents to register if they have a minor presence in New Zealand that is less than taxable activity. Further provisions have been inserted, with effect on 1 April 2014, to explicitly provide that a branch registered for GST is treated as a separate person from its head office and any other branches.
Goods and services connected with exported boats and aircraft
Section 11(1)(k) has been amended to provide that a supply of goods is zero-rated when the goods are supplied closely in connection with goods that are imported under a temporary import entry, or that are supplied from outside New Zealand, destined for outside New Zealand and do not leave the craft on which they are embarked.
Section 11(8) has been replaced to provide for the 60-day period in which export of a boat or aircraft must take place (if the supply of the boat or aircraft is to be zero-rated) to be extended.
These amendments are effective on 30 March 2017.
GST and capital raising costs
Section 20H has been inserted to replace a zero-rated rule for certain financial supplies and provide a deduction rule for GST incurred in making supplies of financial services for raising funds intended for use by the registered person in a taxable activity. Such a rule is intended to enable businesses who do not principally make supplies of financial services to claim back GST on their capital raising costs to the extent that the capital raising is undertaken to fund a taxable activity. The amendment is effective on 1 April 2017.
Grouping limited partnerships
Section 55(8) has been amended to allow limited partnerships to apply the test for persons other than companies to form a GST-registered group. This recognises that while limited partnerships are treated as companies for GST purposes, the grouping test that applies to companies does not apply well to limited partnerships. It is therefore more appropriate to apply the alternative “control” test that applies to other persons. The amendment is effective on 30 March 2017.
Horse racing and prizes
New s 5(11CB) treats a prize received by a horse owner (registered person) as consideration for a supply of services provided to the racing club or racing code for the performance in a race of a horse or greyhound owned by the registered person. It is intended to codify the industry practice of treating winnings paid to registered horse owners who enter the race in the course or furtherance of a taxable activity as consideration for a taxable supply. The amendments are effective on 1 April 2012.
Refunds of excess tax
Section 45, which relates to refunds of excess tax by the Commissioner, has been amended by expanding the situations in which the Commissioner may make a refund after the usual deadline. The amendment is effective on 1 April 2005.
Secondhand goods: gold, silver and platinum
Paragraph (b) of the definition of “secondhand goods” in s 2(1) has been expanded to exclude goods composed of gold, silver or platinum that are “of a kind not manufactured for sale to the public”. The new definition allows deductions to be claimed for the gold, silver or platinum content of a variety of goods such as jewellery. S
Services connected with land
New subsections 11A(1)(k)(i) and (ii) have the effect of limiting the services that will not be zero-rated under s 11A(1)(k). Services will not be able to be zero-rated when:
- they are directly in connection with land or an improvement to the land, that is located in New Zealand (the current test), and
- when they are in connection with land or an improvement to the land, that is located in New Zealand and are intended to enable or assist a change in the physical condition, ownership or other legal status of the land or improvement.
Services physically performed outside New Zealand
Remedial changes have been made to subsections s 11A(1)(j), (jb), and (jc) and a new s 11A(1C) inserted to ensure that New Zealand resident booking agents arranging services that are physically performed offshore and which are not themselves remote services should be able to zero-rate their supplies, and also align the treatment of non-resident booking agents with the treatment of a New Zealand booking agent. The amendments are effective 1 October 2016.
Technical changes have been made to the rules that govern eligibility to file six-monthly. In particular, the changes
- ensure that a person is eligible to file six-monthly when they make seasonal supplies, regardless of whether they exceed the turnover threshold
- clarify that a person who exceeds the turnover threshold for six-monthly filing must change their taxable period, and
- replace the current discretion for six-monthly filing with a “one-off” exception, which enables a business to continue to file six-monthly when the threshold is exceeded.
New s 15(2) expands eligibility to file six-monthly to a larger group. Seasonal businesses can apply to file GST on a six-monthly basis if they make 80% or more of their supplies for an income year during a period of six months or less that ends with, or less than one month before, the end of the income year and have not had a six-month period as a taxable period under this section in the 24-month period before the application.
New s 15C(2B) relieves a person of the requirement to change their taxable period where they are likely to not exceed the threshold in the following taxable periodThe amendments are effective on 30 March 2017.
Supplies of land leases
Amendments have been enacted that:
- ensure that a supply from landlord to tenant, as part of a lease surrender arrangement, is zero-rated (s11(8D)(ab) inserted, effective 1 April 2011)
- rework the test in s 11(8D)(b) for whether an arrangement is a commercial lease, and therefore not a supply of land under the compulsory zero-rating of land rules, so that
- it applies to a supply under an agreement that provides for periodic payments rather than when the land is supplied periodically, and
- the position is retained so that when payments under the lease (other than regular lease payments) are anticipated not to exceed 25% of total consideration payable under the lease, the supply is not a supply of land under s11(1)(mb). However, when this threshold is exceeded (for example, because the payment is higher than anticipated) the treatment of past payments is not affected.
In addition, the new rules have been extended to supplies of goods to GST-registered non-profit bodies so that the supply is zero-rated in circumstances when the non-profit body would ordinarily be able to deduct GST incurred.
Time of supply when consideration is unknown
Section 9(6) has been replaced to provide a method for suppliers to account for GST on supplies of goods and services when the consideration payable (and therefore the amount of GST that must be accounted for) is not known at the time of supply. The amendment enables the supplier to account for GST to the extent that payment is made or an invoice for a payment is issued. This extends the previous rule and provides a practical way of accounting for GST.
The amendment is effective on 30 March 2017 and also applies to supplies before that date when a business has previously accounted for GST consistently with amended s 9(6).
Find Out More
This edition of New Zealand Goods and Services Tax Legislation fully consolidates the Goods and Services Tax Act 1985 to 1 April 2017, taking in the changes made by the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017.
The book includes:
- Goods and Services Tax Act 1985
- Comprehensive summary of amendments
- Pending reforms
- Extensive history notes
- Full index.