A Week in Review

Richard AshbyPartner, Gilligan Sheppard

Feedback sought on GST proposals

IR’s Policy & Strategy have released an issues paper, seeking public feedback on various GST policy issues, where it has been identified that the present legislation produces an outcome that does not reflect the underlying policy intent.

The areas of focus include:

  • Tax invoice requirements – removing some of the present criteria surrounding tax invoices or making the rules more flexible, to align GST invoicing requirements with today’s business practices and technology. For example, removing IR pre-approval requirements from the buyer-created tax invoice process, allowing the parties instead to agree between themselves what is most appropriate for the businesses in question;
     
  • Crypto-assets – removing crypto-assets from the GST rules by making crypto-assets an exempt supply. The proposed changes are only to the supply of crypto-assets themselves, and not to other services related to crypto-assets such as mining or providing crypto-asset exchange services;
     
  • Amending the change in use wash-up formula for non-land assets – presently if an assets’ use changes to 100% taxable or non-taxable use, and the 100% such use remains for the balance of the current adjustment period plus all of the following adjustment period, the taxpayer is required to make a final wash-up adjustment. Officials consider however that the final wash-up adjustment formula does not take into account prior non-taxable/taxable use of the asset, and consequently are recommending a new formula to correct this considered anomaly. Note that changes to the land asset wash-up calculation rules are also proposed and are discussed separately in the paper.
     
  • Amending the going concern rules to ensure, like the present CZR rules, the recipient makes an adjustment post transfer, to reflect any intended use of the supply for private or exempt purposes;
     
  • Amending the concurrent use of land rules to limit the application of section 21E, to not apply in situations where the only taxable use of the land in an adjustment period is holding the land for its eventual sale or development. If the only taxable use of land in an adjustment period is holding the land for its eventual sale or development, then the taxable use of the land during that period would be zero percent. There are also proposals to amend the section 21E(3) formula, which is considered to be over generous presently;
     
  • Offshore businesses undertaking conferences and staff training in New Zealand – having identified that it is impractical to require these offshore businesses to register under the offshore businesses special claimant regime to simply enable them to recover the New Zealand GST costs incurred in attending New Zealand based conferences or staff training events – allowing New Zealand based suppliers to zero-rate their supplies instead to the non-resident business where appropriate;
     
  • Compulsory zero-rating of land (CZR) rules – amendments to provide certainty as to the purchasers obligations where supplies are subsequently determined to have been zero-rated in error by the vendor, the relevant GST period for making adjustments for intended non-taxable use of the land, and clarifying the date of a deemed supply under section 5(23); and,
     
  • Several technical and remedial issues including clarifying how the GST grouping rules should apply in relation to other provisions of the GST Act, amending section 20(3C) to deal with scenarios where the person has not yet obtained physical possession of the goods (so cannot satisfy the ‘available for use in’ criteria) and amending the associated persons second-hand goods rules which limits a purchasers claim to the lesser of three amounts (often zero where the vendor paid no GST), to an input tax credit equivalent to the tax fraction (presently 3/23rds) of the original cost of the goods to the supplier, rather than limiting the claim to the original GST paid by the supplier. Note that this latter amendment will be a great relief to those of us trying to explain to a client, that even though they have bought the land from an associate to develop and make taxable supplies, they cannot claim any GST in respect of the purchase even though full output tax will be payable upon the eventual supply.

The closing date for submissions is 9th April 2020, should you wish to provide your feedback on the proposals. The issues paper can be located here – http://taxpolicy.ird.govt.nz/sites/default/files/2020-ip-gst-issues.pdf

 

IR clarifies PAYE intermediaries rules

IR has published an item, ‘PAYE by intermediaries’ rules, to update all on amendments that have been made to the rules to improve their operability. In case you were not aware, accredited intermediaries are permitted to largely assume an employer’s obligations under the PAYE rules. These obligations are to calculate PAYE, pay it to Inland Revenue and file PAYE returns.

The amendments to the rules:

  • Allow PAYE intermediaries to make payments of net salary and wages directly to employees (from an employer’s account) provided the associated PAYE is simultaneously transferred, or is transferred before the payment to employees is made, into an intermediary’s trust account
     
  • Clarify the accreditation requirements for PAYE intermediaries, and
  • Require PAYE intermediaries to represent at least ten employers.