Goods and Services Tax
GST is a tax on the supply of goods and services in New Zealand by a registered person on any taxable activity they carry out. The rate for GST is 15% although it can be zero-rated for exports.
Certain supplies of goods and services are 'exempt supplies'. These include:
- Certain financial services
- Sale or lease of residential properties
- Wages/Salaries and most Directors' Fees
GST registration is required if the annual turnover of the business for a 12-month period exceeds or is expected to exceed $60,000.
GST Returns can be filed monthly, bi-monthly or six monthly. There are certain requirements for who must file monthly returns and who can file six monthly returns.
There are three methods of accounting for GST:
If your turnover exceeds $2,000,000 pa you cannot use the Payments basis option.
If you are selling or are thinking of selling your products through your website please also refer to the section on GST and E-Commerce.
For more information on GST and how to register give us a call or visit the GST section of the IRD website.
Beach Houses and GST changes
Beware! Do you rent out your Beach House short term? AND is it owned by an entity that files GST returns?
With the changing legislation around the definition of commercial rental properties, we have a concern with beach houses. A commercial rental property now includes residential properties if they are rented out for short term rent e.g. a beach house.
For example, you may have a Trust which owns a farm and therefore is GST registered. And this Trust also owns your beach house. If you rent out your beach house short term, you must now return GST to the IRD on the income and expenses for the house. This includes many people who advertise their property on the internet, perhaps the “Book-a-Bach” site or similar. And this is also very easy for the IRD to trace.
There may also be GST implications on the sale of your property.
If you have no other business in the entity which owns it, there are no implications for you with the new rule. You will not need to be GST registered unless your turnover exceeds $60,000 per annum which would be far in excess of the turnover of your beach property. Also if you beach house is not rented out, you have no worries.
A solution could be to transfer the property to another entity which is not GST registered. If this might apply to you, we suggest you come and talk to us.
Land Transactions - Zero Rated GST
Land transactions between GST registered persons is Zero rated for GST from 1st April 2011 providing the purchaser:
- Provides a written statement that the land is to be used in a taxable activity
- Is GST registered
- The land is not to be used as a principal place of residence by the purchaser or any person associated with them
- This also includes business assets sold with the premises such as plant and machinery.
This has the great benefit of not having to finance the GST while you wait for a refund from the IRD.
Things to do:
- Pricing will be 'plus GST if any' in the purchase agreement
- Vendor needs written statement showing purchaser's GST registration status and intentions for the lands use.
- There is a new schedule, schedule 2 in the standard sale agreement that documents to GST infomation
- GST registration status is important on settlement date rather then unconditional date.
Things to watch out for
GST registration status may be difficult to determine for purchasers nominees
GST position changes before settlement date - if purchaser or nominees become unregistered before settlement date than GST would be charged.
GST Apportionment rules
Previously for goods and services acquired that have an exempt or personal portion, GST tax adjustments were made continuallly. New rules now imply a one-off adjustment is made at time of purchase.
There will be a special 'wash-up' adjustment at time of sale, deregistration, or when a portion of the asset's used for taxable supplies varies.
Return to Tax Facts