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The supplier (lessor) of goods under a finance lease is able to elect for the GST rate on payments made after 1 October 2010 to remain at the rate of 12.5% provided all these conditions are met:
If you make or receive payments for a finance lease after 1 October 2010 that have GST included at 12.5% you’ll need to account for these as an adjustment in the GST return for the period in which the payment is made or received.
The GST-component of the payment can be calculated by dividing the amount of payment by 9.
If you are making the payment you include the adjustment as an "other" adjustment in Box 13 of your GST adjustments calculation sheet (IR 372).
If you are receiving the payment you include the adjustment as an "other" adjustment in Box 9 of your GST adjustments calculation sheet (IR 372).
A finance lease eligible to have payments continue at the GST rate of 12.5% must have met the following criteria:
If payment for goods or services is made in a foreign currency, convert it to New Zealand dollars using the exchange rate applying at the time the goods or services were supplied.
To claim a GST credit you must hold a tax invoice in New Zealand currency.
Sometimes a final price is not settled until after the goods are physically supplied. This section explains the rules for these situations.
If you are selling goods in this manner and you use the invoice or hybrid basis, include the GST in the earliest period that an invoice is issued for any part of the supply, or a payment is due, or a payment is received.
If you purchase goods where the full price is not known, and you use the invoice basis, you claim a credit in the earliest taxable period that you receive a tax invoice, or you make a payment, or a payment is due. Include the total amount invoiced, due or paid.
For purchases under the payments or hybrid basis, you claim a credit when you make a payment.
Example: Jeremy, a farmer, sells produce to an exporter for a down payment on 18 September 2010 plus an end-of-season catch-up based on export prices in December 2010. Jeremy accounts for the down credit immediately at the GST rate of 12.5%.
The catch-up payment is accounted for when it is due, or received, or when an invoice is received, whichever is earlier. If the catch up payment is received in December 2010 as agreed the payment will be subject to GST at 15%.
Gaming machines are machines that are constructed, designed or adapted for use in gambling.
If you operate gaming machines you should be registered for and paying gaming machine duty for each calendar month for all machines. You must also pay GST on the value of the gaming machine revenue, which is the difference between:
The amount of any jackpots won during that return period is also deducted from total turnover if the jackpot figure is not included in the metered total wins.
The gaming machine revenue for GST purposes is calculated from the information provided in the record keeping requirements for the Department of Internal Affairs.
If your monthly machine analysis reports or cashless gaming machine analysis reports are prepared to coincide with the last day of your taxable periods, the report(s) prepared during this period can be used to calculate the gaming machine revenue.
Problem gambling levy (PGL) is also payable on gaming machine profits. PGL is calculated at 0.78% of all gaming machine profits plus GST. You may claim back the GST on problem gambling levy.
For more information about gaming machines, see our Gaming machine duty (IR180) booklet.
Example: Colin operates gaming machines in a local sports club and bar. He is required to send Inland Revenue a gaming machine duty “GMD” return and payment by the 20th of the month following the month in which the gaming machine profits were collected. Colin is registered for GST and files GST returns on a two-monthly (odd) basis.
Colin's GMD return and payment for September 2010 are due on 20 October 2010. The PGL which is subject to GST, is included on the GMD return.
The rate of GST will change to 15% from 1 October 2010. The general time of supply rule applies to the PGL. A payment of the PGL will trigger the time of supply and any GMD return filed with a payment made from 1 October 2010 will be subject to GST of 15% on the PGL.
As Colin’s September 2010 GMD return is due on 20 October 2010, his return has already been updated to show GST on the PGL at 15%. If Colin had prior outstanding GMD returns, he must pay GST on the PGL at 12.5% if filed before 1 October 2010, otherwise GST applies at 15% from 1 October 2010.
Colin’s GST return and payment for the period ended 30 September 2010 are due on 28 October 2010. The gaming machine profits included in that return will be subject to GST of 12.5%.
Grants and subsidies from the Crown or public authorities are considered to include GST if the recipient is registered for GST. Include the full grant or subsidy in Box 5 of your return.
George employs 10 staff. He receives a wage subsidy of $200 per week for eight weeks. The GST content would be $208.69.
George includes $1,600 with sales in Box 5 of his return.
An exception is grants intended for overseas use for international development. You'll have to return GST only on the portion of the grant that is allocated for administration and capacity building in New Zealand.
If you receive a grant or subsidy from a government department, you don't normally need to issue a tax invoice. However, if you receive a grant or subsidy, such as a research grant from another registered person, you'll probably be asked for a tax invoice.
If you pay a grant or subsidy in exchange for taxable supplies, you may request a tax invoice and claim a GST credit as usual.
You must account for all hire purchase sales in the taxable period covering the date you enter into the agreement, regardless of the accounting basis you use.
If you buy goods on hire purchase, you may claim a deduction in the taxable period covering the date you enter into the agreement, regardless of the accounting basis you use.
Rebecca sells a carpet on hire purchase to Emily on 7 June. The cash price is $550, which includes GST. The agreement is for 36 monthly payments of $23, totalling $828.
Rebecca accounts for the sale on the cash price of the goods ($550) in the period covering 7 June. Emily also claims for her purchase on the cash price of the goods ($550) in the period covering 7 June. The difference of $278 is the finance charge, which is an exempt supply.
Time of supply occurs at the time the agreement is entered into.
Example: Yendis buys a carpet on hire purchase from Jason on 7 June 2010 which includes GST at a rate of 12.5%. As the agreement was entered into before 1 October 2010, Jason's agreed repayments will not increase due to the increase in GST. If the agreement was entered into on 2 October 2010, the GST that would apply is 15%.
GST applies to certain supplies of services that are imported to New Zealand. For example:
If you are receiving imported services from an overseas supplier you may need to account for GST on the cost of the services, whether you are currently registered for GST or not. This is the "reverse charge" mechanism. The reverse charge requires you to add GST (15%, or 12.5% before 1 October 2010) to the price of the services you have received.
You include that amount in your GST return and pay it to Inland Revenue if:
If you have not previously been registered for GST, you will be required to do so in the event that the value of imported services takes your turnover above the GST registration threshold of $60,000.
The reverse charge is also likely to apply to GST-registered persons who are currently required to apportion between exempt and taxable supplies. There are special provisions if you are receiving the imported services from a non-resident member of the same GST group.
A person required to pay GST under the reverse charge is treated as the supplier of the services for registration purposes, payment of output tax and record-keeping.
GST on imported services see Tax Information Bulletin Vol 16, No 10 (November 2004).
Persons on the invoice basis account for GST in full in the period in which any payment is made or invoice received. Persons on the payments basis account for GST when a payment is made in a period for the goods.
Time of supply occurs when:
Example: Paul imports a specialised truck for his business which arrives on 30 September 2010. Customs charge GST of 12.5% on the value of the truck. Paul accounts for the truck within the adjustments section of the return covering the September period.
If Paul is using Customs deferred payment system and is issued a deferred payment of duty statement that requires payment to be made at a later date, the GST will still be applied at the date the goods were imported, ie 12.5%. If the truck was delayed and arrived on 10 October 2010, GST of 15% would apply. Paul would account for the truck within the adjustments section of the return covering the October period.
If you receive an insurance payment relating to your taxable activity, you must include the GST content as an adjustment in Box 9 of the return covering the time you received the payment.
Graham's distilling equipment was damaged by fire on 20 January 2011. An insurance company issued a cheque on 18 March 2011 for $4,600 to cover the damage.
Graham includes $600 ($4,600 x 3 ÷ 23) in Box 9 of the return for the taxable period covering 18 March 2011.
You don't need to account for any insurance or compensation payment received for loss of earnings, such as accident compensation. However, the insurer will still charge GST on the premiums for this type of cover.
You don't account for any payment received under a life insurance contract, as the insurer can't charge GST on the premiums.
Some types of insurance premiums are liable for GST (such as fire and general insurance). A registered insurer may claim deductions for payments to policy holders when they are made. A tax invoice is not needed.
The insurer needs a tax invoice to deduct any other payments for claims on policies, such as a payment to a panelbeater for repairs to an insured vehicle.
An insurer cannot claim for payments made under life insurance policies.
Generally, the time of supply for insurance payments occurs on the day the registered person receives the payment. For example, an insurance payment received on 15 November 2010 will include GST at the rate of 15%, even if it is a payment for a loss which occurred before 1 October 2010.
However, a payment made by the insurer in late September 2010 may not be received by the insured registered person until October 2010. This would mean that the registered person has to pay GST at the rate of 15% on the payment, even though the payment was made at the old GST rate of 12.5%. The overall payment the registered person receives may not fully cover the loss.
A transitional rule has been introduced to provide some leeway for payments that were paid out in September 2010 but are not received until October 2010. A payment under a contract of insurance received on or after 1 October 2010 is treated as being received on 30 September 2010 if: