New legislation - 2006: Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 [2006 No 3]

GST and international postage stamps

Section 5 of the Goods and Services Tax Act

Section 5(11I) of the Goods and Services Tax Act has been amended by inserting a definition of "postage stamp".

Background

Previously, the GST Act defined "postage stamps" according to the Postal Services Act 1998. The Postal Services Act governs the supply of domestic postal services. Postal services involved solely in delivering mail overseas are not covered by the Postal Services Act, whereas operators involved in both domestic and international mail are. Persons that are not regulated by the Postal Services Act may issue stamps, but these are not "postage stamps" as defined in the Postal Services Act (and arguably not subject to the rule in section 5(11I) that would treat the supply as occurring when the stamp was sold).

The GST Act therefore had the potential to treat stamps differently depending on whether or not the stamp was sold by a postal services operator that was regulated by the Postal Services Act. Stamps sold by persons that were not covered by the Postal Services Act and relating to the transport of goods from New Zealand could arguably be zero-rated because the supply of stamps was connected with international mail. This situation arose because the GST Act gives taxpayers the option to treat the redemption of a stamp provided by a person who is not a registered postal operator as the supply instead of the issue or sale, if it is not practical to treat the issue or sale as the supply.

Similar services supplied by a person who was regulated by the Postal Services Act could not be zero-rated because of section 5(11I) and the reference to "postage stamp".

The new amendment ensures that GST applies to the supply in New Zealand of all stamps connected with mail and is consistent with the general policy of taxing services that are consumed in New Zealand at the single rate of 12.5%. The New Zealand-based sender of the mail is considered to receive the benefit of having it sent to another person and therefore as having consumed the postal services in New Zealand.

Key features

The amendment removes from the GST Act the reference to the definition of "postage stamp" contained in the Postal Services Act and replaces it with a broader definition of "postage stamp" in section 5(11I)(a) of the GST Act.

The new definition refers to an adhesive label, or mark or design, that is:

• issued or sold by a person to another person; and
• affixed to, impressed on, or printed on stationery; and
• indicates pre-payment of the fee chargeable for the carriage of a letter or parcel, or other article; and
• not intended to distinguish the article to which it relates from similar articles carried by the same person.

The new definition focuses on products that indicate pre-payment for carriage but are not specific to the parcel or article on which they are attached. Examples of adhesive labels that are not intended to be covered by the amendment include adhesive receipts that are particular to the parcel in terms of the amount charged (for example, PAT labels) or that uniquely identify the parcel in some manner (for example, a barcode).

Application date

The amendment applies from the date of enactment, 3 April 2006.

Other pages in: Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 [2006 No 3]

• Temporary exemption from tax on foreign income for new migrants and certain returning New Zealanders
• Clarification of treaty override power
• Rewrite amendments
• Reimbursement for the use of a private motor vehicle
• Organisation approved for charitable donee status
• Resident withholding tax on dividends paid by non-resident companies
• Amendments to disputes rules
• Miscellaneous technical amendments
• GST on goods outside New Zealand at the time of supply
• GST and distributions from a trust made for no consideration between associated registered persons
• GST and credit contracts legislation
• Bloodstock write-down rates
• Duty on racing
• GST on goods and services supplied to security holders
• Trans-Tasman imputation credit-streaming
• Regrassing and fertilising expenditure
• The addition of Spain to the grey list
• Unacceptable tax position
• Reverse takeovers and continuity rules
• Increase in the child tax rebate
• Income tax exemption for gaming machine income of gaming trusts
• Tax consequences of natural disasters
• Taxation of foreign hybrids and foreign tax credit rules
• Exemption for rights to benefit from employment-related foreign superannuation schemes
• New disclosure and recordkeeping rules for foreign trusts
• Treatment of distributions from cooperatives
• ACC attendant care payments
• Venture capital investment alongside the Venture Investment Fund
• Corporate migration
• Allocation of research and development tax deductions
• Taxation of share-lending transactions
• Fringe benefit tax
• Depreciation rates
• Aligning provisional tax payments with GST
• PAYE subsidy for small businesses

Date published: 23 Jun 2006

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