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Weekly Comment 9 January 2015

1. It is a New Year and it is time to ask what has been happening on the GST front in the past few months. The answer is: plenty. I will be spending the next few weeks looking at these GST matters.

2. Inland Revenue has released:

1. QB 14/03: GST – Transfer of interest in a partnership, published in Tax Information Bulletin Vol. 26, No. 5, June 2014, starting on page 57;


2. Product Ruling – BR Prd 14/08 applied for by Body Corporate 358851 concerning the GST treatment of payments received by unit owners from an insurance payment received by the body corporate;


3. QB 14/06: GST – Hire firm security bonds, published in in Tax Information Bulletin Vol. 26, No. 7, August 2014, starting on page 131;


4. Public Ruling – BR Pub 14/06: Payments made by parents or guardians of students to State Schools – GST treatment, published in in Tax Information Bulletin Vol. 26, No. 9, October 2014, starting on page 3;


5. QB 14/10: Goods and services tax – Whether a binding contract always establishes a transaction giving rise to a supply for section 9(1) purposes, published in Tax Information Bulletin Vol. 26, No. 10, November 2014 starting on page 32;


6. Draft QWB0121: Goods and services tax – Lotteries, Raffles, Sweepstakes and prize competitions, for which comments closed on 24 October 2014;


7. Draft Public Ruling: Goods and services tax – Legal services provided to non-residents relating to transactions involving land in New Zealand, for which comments close on 30 January; and


8. Draft Public Ruling: Goods and services tax – Fishing quota – secondhand goods input tax deductions, for which comments close on 30 January.

3. There have been a number of GST cases, notably:

1. Taxation Review Authority, TRA 007/12, [2014] NZTRA 08, concerning whether a lessor remained liable for GST on lease payments after the lease payments had been assigned to a finance company;


2. Taxation Review Authority, TRA 023/12, [2014] NZTRA 10 on a dispute regarding whether the time of supply of newly subdivided land was before or after the GST rate increased from 12.5% to 15% on 1 October 2010;


3. Taxation Review Authority, TRA 05/12, [2014] NZTRA 13, concerning whether advice and services provided to non-resident cruise lines, incentive houses and travel agents could be zero-rated;


4. Taxation Review Authority, TRA 008/14, [2014] NZTRA 15, concerning whether the input tax deduction restrictions on supplies between associated persons applied to a supply of a dwelling which became subject to GST due to the changed definitions from 1 April 2011; and


5. High Court, Concepts 124 Limited v Commissioner of Inland Revenue [2014] NZHC 2140, concerning whether a company owned by a trust was associated with a company owned by the shareholder of the trustee company.

4. In addition, a number of recent GST law changes are contained in the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014. Inland Revenue's explanation of the changes is available on Inland Revenue's website and is published in Tax Information Bulletin Vol. 26, No. 7, August 2014, starting on page 95. I discussed these changes as proposed in the Tax Bill in Weekly Comment 14 February 2014 and 21 February 2014:

1. Changes to the dwelling definition for retirement accommodation, which applies from the 2011-12 income year onwards, subject to a saving until 31 March 2015 for tax positions already taken;


2. Removing backdating of tax residence for GST purposes, from the date of Royal assent, being 30 June 2014;


3. Permitting GST input tax to be claimed on directors’ fees when paid to an employee of a GST-registered entity, from the date of Royal assent, being 30 June 2014;


4. Including assignments and surrenders of interests in land in the GST zero-rating of land rules, from 1 April 2011;


5. Including payments for the procurement of a lease in the GST zero-rating of land rules, from the date of Royal assent, being 30 June 2014;


6. Permitting services on tools used for goods to be exported to be zero-rated, from the date of Royal assent, being 30 June 2014;


7. Permitting zero-rating of services to non-residents despite minor presence in New Zealand, from the date of Royal assent, being 30 June 2014;


8. Ensuring non-profit bodies can claim all input tax deductions except those relating to making exempt supplies, from 1 April 2011;


9. Closing a loophole that apparently allowed non-residents to sell high value goods to NZ consumers by importing the goods themselves, from 1 April 2014;


10. Remedying an error so as to allow a GST-registered purchaser to claim an input tax deduction if subject to the domestic reverse charge and making taxable supplies, from 1 April 2011;


11. Requiring a “wash-up” calculation when use of an asset changes to 100% taxable or 100% non-taxable use, from the date of Royal assent, being 30 June 2014;


12. A transitional rule that restricts input tax deductions for a dwelling that become subject to GST under the changed definitions if the dwelling was acquired before the introduction of GST on 1 October 1986, for tax positions taken after 22 November 2013 (the date of introduction of the Tax Bill that resulted in the legislation);


13. Allowing suppliers affected by the changed definitions of dwelling the option of including a commercial dwelling as part of their broader taxable activity, from 1 April 2011;


14. Broadening the definition of “hire purchase agreement” to include any contract where a person has an option to purchase, from 1 April 2005, with a savings provision for taxpayers who had filed returns under the contrary position until the date of Royal assent, being 30 June 2014; and


15. Various other remedial amendments, including requiring a recipient of land incorrectly standard-rated to correct the incorrect input tax claim, ensuring commercial lease arrangements are standard-rated unless an irregular and large payment is made, from 1 April 2011, and tidying up some aspects of the rules allowing non-residents to register for GST.

5. I will commence looking at these GST developments next week.