Government tweaks GST to ease changeover

Tuesday 10th August 2010

The New Zealand government today released details on the proposed changes to tax legislation that will help businesses make the transition to the increased 15% GST rate.

The transitional rules, which are elective, aim to address situations where the supply of goods or services straddle the changover on October 1 by allowing specific businesses to lock in their GST rate at 12.5% for deals entered into before the October deadline.

"The proposed changes will ensure that the legislation better takes into account business practice, removes excessive compliance costs in particular cases or removes an unfair outcome for the business or customer concerned," said Revenue Minister Peter Dunne.

The changes will be included in a Supplementary Order Paper to the Taxation Bill of 2009 which is reaching its final parliamentary stages.

Those eligible include:

• Businessess, such as general insurers and leasing companies, who supply goods or services under contractual terms and receive periodic payments;

• Businesses, which currently account for GST when an invoice is issued, even though they make successive supplies and therefore should account for GST when each payment becomes due;

• Insurers, when dealing with insurance claims after October 1 and under pre-deadline contracts;

• Businesses, when receiving credits or replacing goods, reverse the entire original tax invoice and issue a new one;

• Businesses generating invoices for September supplies which are not posted until October 1;

• Suppliers, which have sold goods and products on lay-by sales;

• Private training establishments, which are required to use a trust arrangement when students pay their course fees in full.

Eugene Trombitas, GST partner at PricewaterhouseCoopers, said it is essential businesses ensure they have the right systems and processes in place to remove any confusion and avoid unneccesary costs.

"The newly announced GST transitional rules are the final piece of the package that businesses have been waiting for, and provide practical clarity toa wide range of industries," Trombitas said.

Businesswire.co.nz

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