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GST (Goods and services tax) Te tāke hokohoko

GST on special supplies (a - e)

Accommodation

The supply of residential accommodation in a dwelling is exempt from GST. However, accommodation in a hotel, motel, other commercial dwelling, hospital or residential establishment may include GST.

If your taxable activity is a hotel, motel, or other commercial dwelling, the GST on the accommodation (domestic goods or services) is calculated in two different ways:

  • four-week rule for commercial dwellings
  • four-week rule for residential establishments.

Four-week rule for commercial dwellings

Charge GST on the full value of accommodation in hotels, motels and other commercial dwellings for the first four weeks' stay.

After four weeks, charge GST only on 60% of the value of the domestic goods or services. These are usually the right to occupy the premises and any of the following if they are included in that right:

  • cleaning and maintenance
  • electricity, gas, air-conditioning or heating
  • telephone (not tolls), television, radio or similar chattels.

If a joint charge covers all supplies for bed and breakfast, the fully taxable supplies (breakfast) must be separately identified from the domestic goods or services (bed).

Example

Kim Brown stays for six weeks at the Holiday Hotel. The GST-exclusive costs are:

42 nights at $104 per night  =  $4,368
Food and laundry   =  $1,035



Comedy Hotel - Tax Invoice

Ms Brown
71 John Street
Christchurch
  GST No. 87-654-321

8 April 2011
28 days (first four weeks)
at $104 per night $2,912.00  
GST (15% of $2,912.00) $   436.80  
$3,348.80
14 days (after four weeks)
at $104 per night $1,456.00  
60% of $1,456.00 $873.60    
GST (15% of $873.60) $   131.04  
$1,587.04
Food and laundry $1,035.00  
GST at 15% $   155.25  
$1,190.25
Total due $6,126.09
Main Street
WELLINGTON
PO Box 36 363
WELLINGTON
Phone:(04) 333 6666
Fax: (04)366 6663

Show the following in the GST return:

$436.80 (first 28 days)
$131.04 (next 14 days)
$155.25 (food and laundry)
$723.09 (total GST charged)

$723.09 x 23 ÷ 3 is $5,543.69 which should be shown in Box 5.

Four-week rule for residential establishments, such as boarding hostels or rest homes

If there is an agreement that the stay is for more than four weeks, GST must be charged on 60% of the value of domestic goods or services from the start of the stay.

Rest homes and private hospitals

In Tax Information Bulletin Vol 6, No 2 (August 1994) standard rates were published for the apportionment between domestic and non-domestic goods and services for rest homes and private hospitals. The rates that will generally be acceptable to Inland Revenue are as follows:

Rest homes - 45% domestic goods and services.
  - 55% non-domestic goods and services
Private - 35% domestic goods and services.
Hospitals - 65% non-domestic goods and services.

Rest homes and private hospitals may also use a factual basis for apportionment if they believe that the above rates are not consistent with the supplies they make, provided they have sufficient records to support their calculations.

As explained in the Tax Information Bulletin, the apportionment rates can also be simplified down to composite rates of GST. The composite rates of GST are:

Rest homes: 12.3% (10.25% before 1 October 2010).

Private hospitals: 12.9% (10.75% before 1 October 2010

Important - GST rate change affecting time of supply

Example: Angus is an IT contractor assigned to a project in Auckland by his employer for one month from 1 September 2010. At the end of September the project is not finished and Angus will need to stay another two weeks. The serviced apartment hotel will charge GST on the value of the accommodation at 12.5% for the first four weeks till 30 September 2010.

They will then charge GST on 60% of the value of the accommodation for the final two weeks at the rate of 15% (which is an effective rate of GST of 9%).

The hotel and Angus's employer will claim an input tax credit for GST on the return period which covers the earlier of the time an invoice is issued or the time any payment is received by the hotel.

Example: Sinead enters into an agreement with a rest home on 1 June for long-term accommodation. Sinead pays for the accommodation on a monthly basis. The rest home charges GST on 60% of the value of the accommodation, first at 12.5% until 30 September and then 15% from 1 October.

Advance payments

A supplier who receives advance or progress payments must account for the GST on the payments. These are not financial services (exempt supplies) but are inducements for a supply of goods.

Example

A payment from a marketing board to Theresa, a grower, is accounted for as follows:

Theresa's return
Theresa includes the payment in total sales in Box 5 of the GST return for the period she receives it.

If, for some reason, Theresa has to pay back all or part of the advance she received from the marketing board it will be treated as a loan. As a loan, the advance will be exempt from GST because it is a financial service.

Theresa should ask us to reassess the return that included the advance payment.

Marketing board's return
The marketing board may claim a GST credit for the advance payment made, as long as the necessary tax invoice is held.

If the advance is later repaid, the repayment must be included in the total sales (Box 5). Any interest is exempt, as it is a financial service.

Agent's return
A GST-registered agent who is involved in the transaction must account for GST on any commission or fee.

Agents

Special rules apply if a New Zealand agent who is registered for GST acts on behalf of a non-resident principal who is outside New Zealand, and who is not registered for GST.

These are:

  • A New Zealand agent may buy supplies for the non-resident principal. The agent may, in certain circumstances, claim GST incurred when importing or exporting goods to or from New Zealand or arranging transportation.
  • In some instances a non-resident, non-registered principal may wish to sell goods in New Zealand but does not want to have a place of business here. The non-resident may contract the services of an agent to sell and distribute their goods. If the New Zealand agent (who is registered for GST), and the principal agree, the agent will be responsible for returning GST on the sale of the goods rather than the non-resident. The agent will be able to claim GST incurred when importing the goods into New Zealand.
Example

A non-resident art gallery decides to sell several pieces of art in New Zealand. The gallery arranges for a GST-registered agent in New Zealand to carry out the sale. The agent agrees to act as the supplier and importer of the artwork, rather than the art gallery. The agent may claim for any GST paid to import the goods and is responsible for charging GST on the sale of the artwork in New Zealand.

Auctions and auctioneers

Ownership of goods under auction never passes to the auctioneer.

The auctioneers sell goods on behalf of other people, called principals. The auctioneer may not know whether the principals are registered for GST, or whether to charge GST on a particular lot.

The sale of goods on behalf of a non-registered principal is not taxable. The sale of a registered person's private assets is generally not taxable.

The auctioneer can charge and account for GST as though making the taxable supply, as long as both principal and auctioneer agree to this arrangement.

If the principal is registered, the GST-inclusive sale price, less commission, is passed on to the principal who must account for GST.

If the principal is not registered, the auctioneer will pass the GST-exclusive sale price, less commission, on to the principal.

An auctioneer who is registered for GST must account for the GST on fees or commissions.

Auctions may be conducted on either a GST-inclusive or a GST-exclusive basis. It should be stated at the beginning of the auction, so that the bidders know whether or not their bids include GST.

Coin and token-operated machines

If you supply goods or services through any coin-operated device or machine, such as a video game, snack machine or parking meter, you must account for the total value of the coins removed from the machine. Include the amount in the return that covers the date you removed the coins.

If you make a supply through a token-operated device or machine, you account for the tokens in the same way as other tokens, stamps or vouchers. The supplier should treat the token as a supply for GST purposes at the time the customer buys them.

If you receive business goods or services through a coin or token-operated machine, you may claim a GST credit in the period you paid the money.

Important - GST rate change affecting time of supply

Time of supply occurs when the coins or tokens are removed from the machine or meter and the supply is accounted for in the period this happens.

Example: Dave supplies snack vending machines to office buildings. He is due to clear the coins from their machines on 30 September 2010 but is unable to clear the machine until 2 October 2010.

Dave has to account for GST at the 15% rate on the total value of the coins cleared from the machines. The value and GST will be accounted for on the return covering the October period.

Example: Susanna parks a company car at the airport on 30 September 2010 for a two-day business trip. She returns on 1 October 2010 and pays the parking fee.

The transaction can be claimed for GST purposes at the 15% rate and accounted for on the return which covers the October period.

Delayed settlement transactions

If a vendor who is registered for GST enters into a property transaction with a delayed settlement date, the vendor is required to return GST on an invoice basis for the supply if it exceeds $225,000 including GST. This is regardless of their accounting basis. Therefore, if you are on a payments basis you must account for the GST at the earlier time of an invoice being issued or when payment is received. This will not apply if the sale and purchase agreement requires settlement to occur within 365 days.

Dishonoured cheques

If a cheque is dishonoured, it is as though the payment didn't occur, and you don't account for it. Please contact us to correct your return if you've already filed a GST return that includes a dishonoured cheque.

Note

This is only for people who are using the payments basis. For invoice and hybrid bases, this can only be reversed when it is written off as a bad debt.

Door-to-door sales

The time of supply is the first day after the period within which the purchaser may cancel the sale. If you are a door-to-door salesperson, your buyers have either seven days or one month to cancel the sale, depending on the cancellation period. You account for the supply in the taxable period covering the day after the final date for cancellation.

Example

Kay, a door-to-door salesperson, sells an item on 31 May, the last day of the taxable period. The eighth day after the sale is 8 June. She includes the full price for the supply in the taxable period covering 8 June.

If you purchase from a door-to-door salesperson, you can claim a credit in the taxable period that covers the first day after the cancellation period (provided you hold a tax invoice). This applies even if you get an invoice or make payment before that date.

Important - GST rate change affecting time of supply

As the supply is accounted for in the period in which the cancellation period expires, if you are a business involved in door-to-door sales you will need to charge GST at 15% earlier than 1 October 2010.

Example: Lesley, a door-to-door salesperson, sells an item on 30 September 2010, the last day of the taxable period. The eighth day after the sale is 8 October 2010. She includes the full price for the supply using the 15% GST rate. Lesley accounts for the transaction in the return which covers 8 October 2010. .

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