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GST (Goods and services tax) Te tāke hokohoko

Apportioning input tax when goods and services are acquired

When goods and services are acquired on or after 1 April 2011 a claim for input tax is allowed depending on the extent to which goods or services are:

  • used for, or
  • are available for use

in making taxable supplies.

At the time they are acquired, an estimate of the intended use is made by choosing a method that provides a fair and reasonable result. This can be based on:

  • previous records
  • experience
  • business plans, or
  • any other suitable method.
Example

John purchases a new car for $46,000 (including $6,000 GST). He keeps a logbook for the old car showing it was used 70% for business purposes. The ratio of 70% is not expected to change for the new car. He claims $4,200 input tax, ie $6,000 x 70% equals $4,200

There is no requirement to apportion the input tax in an adjustment period if:

  • both taxable and exempt supplies are made, and
  • the expected value of the exempt supplies will not be more than:
    • the lesser of $90,000, or
    • 5% of the total consideration for all their taxable and exempt supplies for the adjustment period.

Apportioning zero-rated goods and services

When zero-rated supplies are purchased, special rules now apply to determine the GST component to account for the amount of output tax that is payable on non-taxable use. An adjustment is made based on the following criteria:

  1. identify the amount of GST that would have been changed if the zero-rating did not apply
  2. determine as a percentage the extent to which goods are intended to be used for making taxable supplies
  3. account for the output tax on the percentage that is attributable to the non-taxable use of the goods.
Example

A 5 storey building is purchased in the city for $20 million. GST is zero rated.

The ground floor of the building (25%) is leased as shopping space - this is a taxable supply. The remaining 75% is leased as residential apartments - this is non-taxable.

The GST component on the building, if it was not zero-rated, is $3m ($20m x 15%). The percentage of the building used as shopping space that is a taxable supply is 25%

The taxpayer must account for output tax on the remaining 75% non-taxable use of the building, amounting to $2.25m ($3m x 75%).

Find out more

You can find more information in our Tax Information Bulletin, Vol 23, No1, February 2011.