GST News - 2004
Issue September 2004
- Changes to GST
- Automated call recording for our call centres
- Online filing - a reminder
- Assets kept after you cease to be registered
- Can't pay your tax due?
- Changed your address?
- Supplies to associated persons
- You can receive GSTNews electronically
- Filing your GST return
Welcome to GST News
We send you this newsletter twice a year, in September and March, to tell you about Inland Revenue services, tax law changes and topical issues relating to GST.
If you have a GST topic you'd like to see covered in this newsletter, please write to the Editor, GST News, PO Box 2198, Wellington or email us at gst.news@ird.govt.nz and we'll aim to cover the topic in a future edition.
Please pass this newsletter on to the person who deals with GST in your business.
Changes to GST
There are two changes to GST that will come into effect from 1 January 2005. As a GST-registered person, they may affect you.
GST on imported services
From 1 January 2005 GST will apply to certain supplies of services that are imported to New Zealand, for example, management, legal and accounting services or products downloaded from the internet. If you are receiving imported services from an overseas supplier you may need to account for GST on the cost of the services. This is the "reverse charge" mechanism. The reverse charge requires you to add GST (12.5%) to the price of the services you have received. You include that amount in your GST return and pay it to Inland Revenue if:
- the imported services would be subject to GST if supplied in New Zealand, and
- you make more than a minimal level of exempt or other non-taxable supplies, ie more than 5% of your total annual supplies are not subject to GST.
This means that if you are a GST-registered person and are currently required to apportion between exempt and taxable supplies, the reverse charge is likely to apply to you. It will also apply if you are carrying on a taxable activity and the level of services that you import takes you over the $40,000 per annum GST registration threshold. You will then be required to register for GST and account for the GST due on the imported services. There are special provisions if you are receiving the imported services from a non-resident member of the same GST group.
Zero-rating of business-to-business supplies of financial services
Also from 1 January, if you are a financial service provider, you may elect, in writing, to zero-rate certain supplies of financial services (for example, dealings with money, certain dealings with securities or the provision of credit and loans) to:
- GST-registered customers making, in a given 12-month period, taxable supplies that are equal to or exceed 75% of their total supplies for the period, or
- customers who are GST-registered and do not meet the 75% threshold but are part of a group that does meet the threshold in a given 12-month period, for example, the treasury or finance function of a group of companies receiving financial services.
To make an election, write to:
Inland Revenue Corporates
Financial Sector
Private Bag 39984
Wellington
Fax 04 802-6192
If you supply financial services to a business customer (excluding banks and finance companies) that meet the criteria above, you may charge GST at the rate of 0% on the supply and claim input tax credits for that supply.
For more information
From early October, our website will have guidelines containing more information about these changes. Alternatively, business customers can phone us on 0800 377 776 and Corporates customers can phone us on 0800 443 773.
Automated call recording for our call centres
As part of our commitment to providing the best possible service to our customers, we automatically record all telephone calls received into our call centres.
We do this to help ensure that consistent and accurate information is provided to customers, and accurate information is gathered from our call centres.
Recording all calls simplifies our current processes and brings many benefits to both customers and Inland Revenue. For example, more meaningful information is gathered because we have a broader range of calls to consider for ongoing improvement. This means we are able to continue giving quality advice and service to our customers.
Visit our website for more information about our call recording practice.
Online filing - a reminder
If you are using our online service to file your GST returns electronically, please remember that you do not have to send us a paper-based return.
Just print the confirmation page of the return, sign it and keep it as a record in your file.
Assets kept after you cease to be registered
If you cease to be registered for GST and keep assets from your taxable activity, remember that you must include the value of those assets in your final GST return. The value must be based on open (current) market value. However, if the asset was purchased before 1 October 1986 the value should be based on the lesser of cost or open (current) market value.
Can't pay your tax due?
We realise that at times, some people may be unable to make their payments on time. If you don't think that you can pay the full amount by the due date, please contact us as soon as possible.
Late payment penalties and interest
- 1% of the unpaid tax, charged the day after it's due
- 4% of the unpaid tax (plus the 1% penalty), charged seven days after it's due
- 1% of the unpaid tax (plus penalties already charged) each month the amount remains unpaid.
Interest is calculated daily on the unpaid amount, including penalties. Penalties and interest are charged on amounts greater than $100.
Note
By contacting us before the due date you will avoid being charged the 4% penalty. If you enter into an instalment arrangement with us, no monthly late payment penalties will be charged during its term, provided payments are made by the agreed instalment dates.
Payment options
If you are unable to pay your tax in full and on time, we will discuss your current circumstances with you and help you work out the best options for paying the amount due. We may consider options such as some form of financial relief, including payment by instalment, if payment in full would result in hardship.
Changed your address?
Please contact us immediately if you change your address and/or telephone and fax numbers. Just phone INFOexpress on 0800 257 777. It's available after hours and on weekends.
Supplies to associated persons
Special rules apply if you make certain supplies to people closely associated with you, such as relatives or closely associated companies or trusts.
If you supply goods or services to an associated person who can claim a GST credit for the purchase, you account for GST on the amount received. However, if you supply goods or services to an associated person who cannot claim a deduction, you must determine the open (current) market value of the supply and account for the greater of the market value, or the amount you charged, in your return.
The open (current) market value is the amount similar goods or services would cost, at the same time, in New Zealand, if the transaction was not between associated persons. It is GST-inclusive.
For a detailed definition of associated persons, see our GST guide (IR375). This is available on our website or by phoning INFOexpress on 0800 257 777.
You can receive GST News electronically
If you or someone you know would like to receive GSTNews electronically you can subscribe to it at our website.
Just give us your email address in the box provided and click the "OK" button.
If you have an email address but do not have internet access, email us and we will subscribe for you.
We'll still continue to send you the printed version of GSTNews.
Filing your GST return
We'd like to remind you that when you file your paper-based GST return, you need to send us the top copy of the return and keep the bottom copy for your records.
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Date published: 23 Nov 2004
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