A Week in Review
Deductions for “Standouts”
Should you or your clients have an appetite for “investing” (I could suggest the use of other words post my recent dabble in a friend’s horse racing syndicate!) in yearlings for breeding purposes, a recent SOP introduced to the Modernising Tax Administration Bill presently making its way through Parliament, may be of interest to you.
The SOP, introduced by Winston Peters (who himself has absolutely no personal interest in the horse racing industry…), will make changes to the tax treatment of bloodstock, by permitting tax deductions and assessing receipts, as if the investor was themselves carrying on a bloodstock breeding business, where:
- the investor has purchased from a NZ premier yearling sale, an interest in a yearling that has the qualities to be a future stud-founding horse (referred to as a “standout yearling”);
- the investor notifies IR of their intention to breed from the yearling for profit in the future and provides the owners’ details; and,
- where requested by IR, the investor can provide evidence to support their stated intention, including a business plan.
The new legislation will include a bright-line test methodology to assist in determining whether an acquired yearling meets the grade in terms of being a “standout”, and to incentivise investors to actually race their horse in NZ prior to sending offshore, there will also be a rule which will deem an amount of assessable income to arise, being the greater of the sum of all previous deductions claimed or the market value of the yearling, where the horse is sold to overseas investors or exported, without first racing or breeding in NZ.
It is proposed that the legislative amendments apply from 1st January 2019, which is likely to first be applicable therefore, to yearlings acquired at the NZ National Yearling Series held in Karaka in late January 2019.
The ability to make submissions on the SOP closes on the 24th October 2018.
GST on low-value imported goods moves one step closer
The final proposed rules for the forthcoming “Amazon” tax, were announced by Revenue Minister Stuart Nash, at the recent CAANZ tax conference.
One key change from the original proposals outlined in the May 2018 discussion document, is the increase in the low-value imported goods threshold from $400 to $1,000. Consequently, where the goods are outside of NZ at the time of supply and are to be delivered to a NZ address, and the total taxable supplies of goods and services to NZ by the non-resident supplier exceed $60,000 in a 12 month period, the non-resident business (including electronic marketplaces and re-deliverers as applicable) will be required to register for NZ GST and charge GST on all goods sold to NZ consumers, with a value of less than $1,000.
Where the value of the goods is to exceed $1,000, NZ Customs will continue to levy GST at the border, although where a non-resident’s supplies of goods exceeding this value equates to 5% or less of their total NZ supplies, there will be an option for them to seek approval from IR to also charge GST on these goods. NZ Customs will calculate the customs value of a consignment, however for self-assessment purposes, the supplier will be able to use a “reasonable estimate” to determine the customs value at the time of supply.
The non-resident supplier will not be required to charge GST on their supply of goods to NZ GST registered businesses, however they will be entitled to zero-rate the supply where appropriate to ensure they can still recover any GST input tax they have incurred in making the NZ supply.
It is proposed that the new rules will come into effect from 1st October 2019, and that while returns will be required to be filed on a quarterly basis from 1st April 2020, there will be the option of an initial six month return period, for those non-resident suppliers caught under the new regime from day 1.
As a result of the introduction of GST on low-value imported goods, tariffs and border cost recovery charges on these goods will be removed, however existing risk management processes undertaken by NZ Customs, such as biosecurity assessments, would continue.
We are likely to see legislation introduced into the House in early November.
Richard Ashby BBus, CA, CPA
PARTNER
Em: [email protected]
Ph: +64 9 365 5532
Mb: +64 21 823 464