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Changes to the GST rules

Sections 2(1), 3A, 3A(3B), 3A(3C), 5(15), 5(22), 5(23), 5(24), 8(4B), 9(2), 9(6), 10(7B), 11(1)(mb), 11(8B), 11(8C), 17(1B), 19D(2B), 20(2), 20(3), 20(3C-3K), 20(4), 20(4B), 21(1)-(4), 21A-H, 24(7B), 25, 43(1B), 43(1C), 51B(4)-(6), 60B, 75(3B), and 78F of the Goods and Services Tax Act 1985.

Budget 2010 foreshadowed amendments to the GST rules as part of a package of changes aimed at improving the integrity and fairness of the tax rules generally.

The Taxation (GST and Remedial Matters) Act 2010 principally strengthens the GST rules by preventing so-called "phoenix" schemes.

The new legislation also makes some useful changes to the GST rules more generally, to make it easier for taxpayers to understand their GST obligations. These include simplifying the change-in-use rules and providing greater clarity over when GST applies to residential and commercial accommodation.

Zero-rating land transactions

In November 2009, the Government released the discussion document, GST: Accounting for land and other high-value assets, which proposed a number of changes to the GST Act to deal with certain GST base risks and improve the operation of the GST system more generally. The main risk to the tax base identified was "phoenix" fraud schemes, typically between associated entities, that involve Inland Revenue refunding GST to one party with no corresponding payment being made by the vendor because the vendor deliberately winds up their business before making payment.

New apportionment rules

For GST purposes, the amount of an input tax deduction that can be claimed by a GST-registered purchaser for acquired goods and services should relate to the taxable use of the goods and services.

Transactions involving nominations

Nominee transactions ordinarily involve a purchaser nominating another person (a nominee) to receive goods and services and/or settle the transaction.

Supplies of accommodation

Accommodation provided by GST-registered persons is generally taxable unless it is expressly treated as an exempt supply.

Application of section 19D to non-profit bodies

Differences in the accounting practices for GST can result in timing advantages being deliberately created when a registered person who accounts for GST on a payments basis makes a supply to another registered person who accounts on an invoice basis.