Glossary of GST terms
Associated persons are:
- companies controlled by the same persons
- companies and individuals with a 25% or greater interest in the company
- partnerships and partners
- relatives by blood, marriage, or adoption to the second degree (including people in a de facto relationship or civil union)
- trustees of a trust and a beneficiary of a trust, except if :
- the trustee is a charitable or non-profit body with wholly or principally charitable, benevolent, philanthropic or cultural purposes and the supply is made in carrying out these purposes, or
- the beneficiary is a charitable or non-profit body with wholly or principally charitable, benevolent, philanthropic or cultural purposes and the supply enables them to carry out these purposes
- trustees and the settlor of a trust, except if the trustee is a charitable or non-profit body with wholly or principally charitable, benevolent, philanthropic or cultural purposes
- trustees of two trusts that have a common settlor, except if:
- either trustee is a charitable or non-profit body with wholly or principally charitable, benevolent, philanthropic, or cultural purposes and;
- the supply is made in, or enables, the carrying out of the charitable, benevolent, philanthropic, or cultural purpose
- trustees of a trust and a person who has the power of appointment or removal of the trustee, except if that person:
- holds power as a provider of professional services, and
- is subject to a professional code of conduct (including a disciplinary process in that code) of an organisation approved by Inland Revenue, and
- has not benefited, and is not eligible to benefit, from the trust
- two persons who are each associated with a third person.
For the purpose of determining whether two companies or a company and an individual are associated, an interest held by any person in a company must be aggregated with interests held by associates of that person.
Commercial dwellings are:
- hotels, motels, homestay, farmstay, bed and breakfast establishments, inns, hostels, or boarding houses
- a serviced apartment managed or operated by a third party where services in addition to the supply of accommodation are provided and the resident does not have quiet enjoyment
- camping grounds
- convalescent homes, nursing homes, rest homes, or hospices
- any similar establishment, and
- any part of a hospital that is a "residential establishment".
Commercial dwellings do not include any:
- part of a hospital that is not a "residential establishment", or
- dwelling within a retirement village or rest home where rent is paid to occupy the dwelling.
For GST, the term "consideration" has a wider meaning than the common usage.
It includes any amount paid, or any act or forbearance, in return for a supply of goods or services. This means it:
- need not be "compulsory"
- need not be in money (such as barter)
- may be a promise to not do something, for example, in return for goods, a creditor may agree not to pursue a debt
- may be an incentive offered to induce a supply
- may be paid by someone else, for example, a parent pays for a child's haircut
- does not include unconditional gifts made to non-profit bodies if the donor does not receive a direct benefit, for example, street appeals or bequests.
Domestic goods and services
The right to occupy all or part of any commercial dwelling.
- cleaning and maintenance
- electricity, gas, air conditioning, or heating, and
- telephone (not tolls), television, radio, or similar chattels where they are provided as part of the right of occupation.
Premises that are a principal place of residence of which a person has quiet enjoyment. It includes the surrounding land and fittings, such as garages and paths, but does not include a commercial dwelling.
For the purpose of GST, "financial planning services" covers planning, implementation and monitoring.
"Planning services" are those provided by an advisor when planning an investor's portfolio of investments. The services are often provided when establishing a portfolio, but can also be an ongoing service. Planning services are subject to GST as they are not a financial service.
"Implementation services" are those provided when an advisor implements an investor's financial plan. Also included are the services provided when a custodian implements the plan and an advisor charges the investor a fee. However, if an advisor's fee in this situation relates to monitoring services, the services are not implementation services. Implementation services come under the definition of "financial services" (see below) for GST purposes and are therefore exempt from GST.
"Monitoring services" are services provided when an advisor monitors and evaluates the performance of an investor's portfolio. Monitoring services are subject to GST, except for any services relating to the collection of income from investment or the arrangement of currency exchanges. These are "financial services" (see below) and are exempt from GST.
Financial services include:
- exchanging currency (for example, changing $US into $NZ)
- issuing and using cheques and letters of credit and all associated activities
- depositing money with, or withdrawing money from, financial institutions, operating bill facilities and trading debts securities, and all associated activities
- paying or collecting interest, principal, dividends or other amounts of any debt security, equity security, participatory security, credit contract, contract of life insurance or superannuation scheme
- providing financial options
- providing credit under a credit contract, such as providing money or money's worth on a credit basis where interest is charged
- issuing, allotting, or transferring ownership of shares in a company other than a flat-owning or office-owning company
- providing or assigning a futures contract on a defined market or on arm's length terms if the contract:
- does not provide for the delivery of a commodity, or
- provides for the delivery of money, or
- provides for the delivery of a commodity which is an exempt supply.
- providing or transferring ownership of a life insurance contract or the provision of reinsurance in respect of any such contract
- providing or transferring ownership of an interest in a superannuation scheme or the management of a superannuation scheme
- in general terms underwriting or sub-underwriting renewals or variations of all activities relating to or guaranteeing any of the above activities
- provision or transfer of ownership of a financial option.
Financial services do not include debt collection services provided by a third party.
For GST, "goods" has a broad meaning. It includes all types of personal and real property, except money and choses in action.
When a registered person buys goods or services to use in a taxable activity, the GST portion of the price is called input tax. This is a legal term - we usually call it a GST credit. It includes:
- the GST on imported goods, and goods held in bond
- three-twenty-thirds of the cash price of secondhand goods bought for the business from a:
- non-registered person, or
- registered person where the goods are not part of their business (this excludes goods that are supplied by a supplier who is not resident in New Zealand and has previously supplied the goods to a registered person who entered the goods for home consumption under the Customs and Excise Act 1996).
If the seller and buyer are associated persons, the consideration for secondhand goods is the lesser of one of the following:
- the GST component (if any) of the original cost of the goods to the supplier, or
- three-twenty-thirds of the purchase price, or
- three-twenty-thirds of the open (current) market value.
- an estate in land or interest in land
- a right that allows an interest in land
- an option to acquire land.
Does not include:
- a mortgage
- a lease of a dwelling when:
- the supply is made periodically and
- 25% or less of the total amount is payable in advance or all at once.
Any society, association, or organisation, whether incorporated or not, that is not carried on for the profit or gain of any member, and whose rules do not allow money or property to be distributed to any of its members.
A person to the extent that the person is not resident in New Zealand
Open (current) market value
The open (current) market value is:
- the consideration that the goods or services would command between unassociated persons, in similar circumstances, at that time, in New Zealand, or
- the value of a "similar supply", in New Zealand, between unassociated persons, or
- a true assessment of the price of the goods and services, using a method we approve.
A "similar supply" is a supply of goods and services with the same (or very close to the same) characteristics, quantity, quality, functional components, materials and reputation as the original supply.
The legal term for GST charged by a registered person on goods and services supplied in a taxable activity. We usually call it GST payable or GST collected.
For the purposes of GST, a person is:
- an individual (natural person)
- a company
- an incorporated club or society
- an unincorporated club, society, or body of people
- a joint venture
- a trustee of a trust
- a trustee of an estate
- a public or local authority
- a partnership.
Includes all government departments, agencies and corporations, but not:
- the Governor-General
- Members of the Executive
- Ministers of the Crown or members of parliament.
Anyone who is registered or is liable to be registered for GST under the Goods and Services Tax Act 1985. Registered persons must charge and collect GST, file returns, and account for GST to Inland Revenue.
Resident in New Zealand
The law states who is a New Zealand resident for tax purposes. Find out more on tax residency.
A "commercial dwelling" that specialises in long-term stays, such as school and university hostels, boarding houses, hospices and rest-homes. Of the people staying there, 70% or more must stay, or be expected to stay, for four weeks or more. It also includes hospitals with long-term accommodation, such as geriatric wards.
Covers everything other than goods or money, for example, TV repairs, doctor's services and gardening services. Together, goods and services are all things that can be supplied for a consideration.
An activity carried on continuously or regularly by a business, trade, manufacturer, professional, association or club.
It includes any activity that supplies, or intends to supply, goods and services to someone else for a consideration (money, compensation, reward) but not necessarily for profit.
Taxable activities do not include:
- working for salary or wages
- being a company director
- hobbies or any private recreational pursuit
- private transactions such as the occasional sale of household or domestic items, or
- making exempt supplies.
The length of time covered by a GST return. It may be one, two, or six months. Taxable periods end on the last day of the month.
Goods and services supplied in New Zealand in the course of conducting a taxable activity. Suppliers charge GST by adding it to the price of their goods and services.
The amount calculated by deducting GST credits (input tax) from GST collected (output tax) on the GST return. It also includes refunds of GST.
We'll work out the tax payable in any of the following situations:
- if a person does not file a GST return
- if a person asks for a return to be altered
- if we're not satisfied with the return
- if a non-registered person charges GST on a supply.
Tax payable includes any late payment penalties and interest charged.
Time of supply
The time when a supply is to be treated as being made for GST purposes. The general rule is that a supply is considered to take place at the earlier of the time an invoice is issued or the time any payment is received by the supplier.
Includes an executor and administrator as well as the Public Trustee and the Maori Trustee.
A donation or payment made:
- voluntarily to any non-profit body
- for the non-profit body to use, and
- when there is no identifiable direct valuable benefit to the giver or the family of the giver.
Some unconditional gifts are:
- door-to-door appeals and street collections
- voluntary school fees (but not school activity fees).
Subscriptions, income from trading activities, and payments made by the Crown or a public authority are not unconditional gifts for GST purposes.
Any day of the week other than:
- Saturday, Sunday, Good Friday, Easter Monday, ANZAC Day, Labour Day, the Sovereign's birthday, Waitangi Day, or
- any day between (and including) 25 December in one year and 15 January in the following year.
Certain goods and services are liable for GST at 0%.
The zero rating applies to goods and services not to the registered person who supplies them.
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