GSTnews - 2008
GST News September 2008
- Calculating assets used for business and private purposes
- Completing your GST returns
- Filing on time
In this September issue: a guide on calculating assets used for business and private purposes and tips on completing your GST returns.
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 6140 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.
Calculating assets used for business and private purposes
If you use business assets for private purposes and you're not registered for FBT you may be required to make adjustments in your GST returns. This applies to:
- sole traders
- partnerships
- trusts.
Adjustments are required where an asset or goods and services are used both privately and for business.
Using a motor vehicle in your business and privately is a common reason to make GST adjustments.
You need to consider:
- GST on the cost or value of the vehicle
- GST on the running costs of the vehicle
- depreciation on the cost or value of the vehicle.
To work out how much a vehicle is used for business and for private use, you need to keep a vehicle logbook. Find out how to set up and use a logbook or read our Smart business (IR320) booklet for more information.
Use the logbook to work out the percentage of business mileage, and use this figure to calculate the appropriate amount of GST. The logbook should be kept for a minimum of three months to ensure the calculated amounts are fair and reasonable.
Example
Jane is a sole trader selling real estate. She started her business on 1 April 2008. She has a Holden Barina which she bought in April for $15,000.
Jane files two-monthly GST returns and on 20 August 2008 she files her June/July GST return. Because she has run her logbook for a three-month test period, she can now include her vehicle. Her logbook calculation shows she uses the car 89% for business.
Jane can return the GST on the vehicle value and make the adjustment using one of three options:
- Period-by-period - a sum is added into the GST return every time a return is completed.
- Annual adjustment - a sum is added once a year in the GST return period that covers the earlier of either the date the income tax return is filed, or the due date to be filed (for example, 7 July if no tax agent). If returns are filed by a tax agent this will be the earlier of either the date the income tax return is filed, or 31 March after the due date for the income tax return.
- One-off adjustment - a sum is added to the GST return only once. This is usually the return period when the purchase has taken place.
For all three options, the following formula is used to calculate GST at 12.5% - this is shown below as the figure 9:
Purchase price x estimated private use
9
Jane's options
The market value of the car is $15,000
The straight line depreciation is 21%
Jane's private use of the car is 11%
|
$15,000 x 21% |
= $525 x 11% = $57.75 |
||||
$57.75 | = $6.42 |
|||||
$6.42 is shown in Box 9 of the GST return each return period for as long as the vehicle remains in business use. | ||||||
|
($15,000 x 21%) x 11% = $346.46 | |||||
$346.46 | = $38.50 | |||||
$38.50 is shown in Box 9 of the last GST return (see description above, "2. Annual adjustment", for when the period should be returned). | ||||||
|
$15,000 x 11% | = $183.33 |
||||
$183.33 is added to Box 9 of the GST return in which the asset was acquired or valued. | ||||||
Jane has chosen the one-off adjustment option so she will be making this adjustment in her June/July return. These details are also required:
- The value which the asset was acquired or valued is shown in Box 9: $183.33
- The full value of the vehicle is shown in Box 11: $15,000
- The full GST on the value of the vehicle is shown in Box 12: $1,666.66.
Completing your GST returns
The quickest, easiest and most secure way to file your Goods and services tax (GST101A) return or your GST and provisional tax (GST103) return is to file it online. Go to "Get it done online" for more information.
Make sure you have your unique 14 digit number (DLN number) to complete the return - you'll find this at the top of your paper return (see page 2).
When filing online and paying through electronic banking you don't need to send us any portion of the form. Please remember to:
- use the "GST" tax type code if you're paying GST only on a GST101A return.
- use the "GAP" tax type code if you're paying GST and provisional tax on a GST103 return.
When filing online and paying by cheque you only need to send us the payment slip at the bottom of the form.
Completing the paper version of the Goods and services tax (GST101A) return
If you decide to use the paper return please either:
- pay by cheque and send the whole form, or
- pay electronically and tick "Yes" on the form. Find out about paying electronically.
Please make a copy for your records.
Inland Revenue uses imaging machines that "read" and record all the figures on your GST return. Please follow these tips on how to complete the return.
Please remember to use a black or dark blue ballpoint pen - don't use vivid, red or highlighter pens.
Completing the Goods and services tax (GST) and provisional tax return (GST103B)
The GST103 is a double-sided return. If you file a GST103, please remember:
- to complete the sections on the back of the return that apply to you to show the amount of provisional tax you need to pay when a payment is due. It's important to complete Box 24 if you have provisional tax to pay as shown here.
- when you complete the front of the GST103 return and have a GST refund due, please let us know whether you'd like to transfer some or all of this to help offset your provisional tax. If you'd like to do this, please complete Box 25.
Note
The GST103 is tailored to your circumstances, so the version we send you may not look like this one.
Filing on time
Part of being in business means that you need to file and pay your GST on time. But we understand you also have other things on your mind.
If you're having problems filing or paying your GST it's best to get in contact with us as soon as possible so we can work with you to get your taxes sorted out. If you leave it until it's overdue, you may be charged late filing and/or late payment penalties.
Call us on 0800 377 776 to talk about your GST.
Since our last newsletter we've introduced late payment grace periods. This means your late payment penalties may be temporarily delayed. If you have a good filing and payment record we'll remind you if you've missed making a payment, or filing a return, before charging a late payment or filing penalty.
Remember - the easiest way to file your return is online. Go to "Get it done online" for more information.
Alan Quinn
Manager
Customer Insight
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Date published: 14 Oct 2008
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