Some examples of finance leases are leasing a car, office equipment or rental property.
The supplier (lessor) of goods under a finance lease is able to elect for the GST rate on payments made after 1 October 2010 to remain at the rate of 12.5% provided all these conditions are met:
- the term of the finance lease began before 1 October 2010 and ends on or after 1 October 2010
- the term of the finance lease is less than or equal to five years in length, and
- the lessor advised the purchaser by no later than 31 October 2010 that the GST rate on payments after 1 October 2010 would remain at 12.5%
Accounting for the payments in your GST return
If you make or receive payments for a finance lease after 1 October 2010 that have GST included at 12.5% you need to account for these as an adjustment in the GST return for the period in which the payment is made or received. The GST-component of the payment can be calculated by dividing the amount of payment by 9.
If you are making the payment you include the adjustment as an "other" adjustment in Box 13 of your GST adjustments calculation sheet (IR372).
If you are receiving the payment you include the adjustment as an "other" adjustment in Box 9 of your GST adjustments calculation sheet (IR372).
A finance lease eligible to have payments continue at the GST rate of 12.5% must have met the following criteria:
- periodic payments are made during the term of the agreement, and
- part of the amount payable under the agreement is towards credit (interest) under a credit contract, and
- if the agreement were to end early the final amount of GST calculated for the supply of goods would be calculated on the basis that the amount paid towards the credit (interest) had decreased with each periodic payment.
Date published: 23 Sep 2010
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