Latest News [index] Transition to the 15% GST rate
The Government has announced proposed amendments to the Goods and Services Act 1985 that will assist with the transition to the new 15% rate, which will be effective 1 October 2010.
The proposed changes will apply:
· to determine how GST is charged for annual contracts such as insurance contracts that straddle 1 October 2010. the proposal here is that GST will be charged at the old rate until the contract's next review date. However to take advantage of this all GST will have to be returned by the supplier in the September GST return, whether or not the GST has been paid;
· to leave the rate of GST at 12.5% for subrogation payments received on or after 1 October 2010 provided the underlying claims are agreed and settled before 1 October 2010;
· to charge GST at the old rate on finance leases entered into before 1 October 2010 for a maximum term of five years where GST-registered lessees were advised by the lessors to deduct input tax at the 12.5% rate on payments made after 1 October 2010 (rather than the new 15% rate). This treatment would be elective, at the option of the supplier;
· so that suppliers may treat tax invoices issued on or before 11 October 2010 for goods or services provided on or before 30 September 2010 as having been issued on the date of the invoice so long as payment is due within 60 days of the date of the invoice;
· so that suppliers of successive supplies such as telephone lines or electricity who account for GST on the basis of when payment is received can elect either the invoice or the "payment due or received" rule provided, that the goods or services are provided before 1 October 2010, the invoice for the supply is dated on or before 30 September 2010, the invoice is issued by 11 October 2010 and payment is due not later than 60 days from the invoice date;
· to provide an interim treatment for replacement invoices (normally two invoices cannot be provided for the same supply) so that where a replacement invoice would alter the time of supply, there would be an option of allowing the issue of a new invoice at the 12.5% rate;
· to provide that for layby sales where there was a contract in place before Budget night (20 May 2010) supplies can elect to apply the 12.5% rate to any payments received before 1 October 2010, rather than treating the entire supply at the rate of 15%, as would otherwise be the case. To apply this treatment the supplier would be required to return these payments in their September GST return; and
· so that special rules apply to Private Training Establishments so that GST is not applied at the new rate for courses supplied before 1 October 2010.
If you have any questions or want further information about the transition to the new rate of GST:
- see www.taxpolicy.ird.govt.nz
- telephone or e-mail a member of the Ayres Legal team