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Changes to GST, FBT and KiwiSaver 2022 More information

Audio and visual transcript

Slide 1

Changes to GST, FBT and KiwiSaver 2022

For Tax Intermediaries

February 2022

The information in this presentation is current as at 23 February 2022


Slide 2

Purpose 

Changes to GST, FBT and KiwiSaver 2022

For: 

  • Tax Intermediaries 

Topics 

  • Goods and Services Tax
  • Fringe Benefit Tax
  • KiwiSaver

Notes 

Last year, the Minister of Revenue introduced the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Bill.

The Bill includes an assortment of proposed changes which are expected to take effect on or before 1 April 2022. There are also a number of other legislative changes which come into effect, or are proposed to come into effect from April too.

Today we’re going to be going over the GST, Fringe Benefit Tax and KiwiSaver changes.


Slide 3 

Title: Goods and Services Tax 

Notes 

Let’s kick off by starting with our largest topic, GST.


Slide 4 

Title: Changes at a glance 

Group rule changes

  • GST supplier groups can continue to issue shared invoices with a defined agreement

Importing and exporting

  • GST registered non-resident businesses able to claim input tax deductions.

Cryptoassets

  • A definition of crypto asset is being inserted into the GST Act and Income Tax Act

Invoicing and record keeping

  • Modernising the GST rules for invoicing and record keeping

Notes 

There are several changes proposed for GST. The changes include a combination of new policy and remedial changes.

These changes have been proposed by the Government and are expected come into effect on or before 1 April 2022.

The key changes can be grouped into five main topics, each of which we will cover at a high-level today:

  • Group rule changes
  • Importing and exporting
  • Cryptoassets
  • Invoicing and record keeping, and
  • Other

So, let’s take a look at the changes for GST groups.


Slide 5 

Title: Group rule changes

There will be more legislative certainty for the treatment of GST groups.

Changes for:

  • Intra-group supplies
  • Information requirements
  • Joint and several liability provisions
  • Membership start dates

Note: There are no changes to the eligibility requirements to form a GST group.

Notes 

The upcoming changes aim to provide more legislative certainty for the treatment of GST groups.

With these changes, GST groups will be treated as if they were a single registered entity for all activities carried out by any member of the group for supplies made to third parties. The changes include a range of clarifications which allow for easier compliance.

An addition to the group legislation will outline the types of intra-group supplies that must be accounted for in a groups GST return. If a provision is not listed in this section, it does not need to be accounted for in the groups GST return.

Currently each group member is required to issue and keep record for all taxable supplies, the upcoming changes mean that the group may choose that supply information can be issued or retained by the representative member, a nominated company, or the supplying member itself. If it is kept by a nominated company (under the administration category), IR will need to be notified.

When a company leaves a GST group, Inland Revenue could allow the joint and several liability obligation to be suspended for the departing company if all of the following points are satisfied:

  • The assessment is a reassessment made after the date the company leaves the group
  • The amount is an increased amount
  • It is considered the removal of joint and several liability will not significantly prejudice the recovery of the increased assessment

This aligns with the joint and several liabilities of a consolidated group for income tax purposes.

The final change for GST groups, relates to the start date for a member that is newly incorporated. Newly incorporated group members can join either at the start of the next GST period or when the company is incorporated - removing the requirement for part period returns from members who are yet to join a group.

Before we move on to the changes for importing and exporting, I would just like to highlight that there will be no change to how representative members are treated. They will continue to be treated as carrying on all activities for the group and they will continue to act on behalf of the group in regards to elections, giving notices, keeping records, and accounting for the group, and there have been no changes to the eligibility requirements to form a GST group.


Slide 6 

Title: Importing and exporting

Suppliers who deliver goods to non-resident recipients will be able to zero-rate the supply if the non-resident recipient will then export the goods outside of NZ.

The domestic leg of the transport of goods that are being exported or imported can be zero-rated.

GST registered non-resident businesses will also be able to claim input tax deductions for all their GST costs purchased in New Zealand that are used to make supplies outside New Zealand.

Notes 

Now, there are three changes for importing and exporting:

The first change will mean suppliers who deliver goods to resident recipients will be able to zero-rate the supply if the recipient then exports the goods outside of New Zealand to a non-resident recipient.  Section 11(1)(eb)(i) will be expanded so that it is not limited to cases where the recipient exporter is a non-resident, all other existing requirements for the goods to be zero rated will still be in place and must be met.

The second change will allow the domestic leg of the transport of goods to be zero-rated when provided by a sub-contracted arrangement, whether they are being exported or imported. This brings the treatment in-line with when both the domestic and international legs are carried out by the same supplier.

And the final change for importing and exporting, will mean GST registered non-resident businesses will also be able to claim input tax deductions for all their GST costs purchased in New Zealand that are used to make supplies outside New Zealand.  Whilst preventing the non-resident business from claiming GST paid to customs on imported. 


Slide 7

Title: Cryptoassets

A cryptoasset is defined as a digital representation of value that exists in a distributed ledger (such as a blockchain) and is secured cryptographically to record the ownership and transactions involving crypto assets.

Fungible cryptoassets will be excluded from GST. 

Non-fungible tokens will remain subject to GST if supplied by a registered person.   

GST will continue to apply to supplies of goods and services which are bought using crypto assets.  

Notes

That brings us to cryptoassets;

A definition for cryptoassets will be added to the Income Tax Act and GST Act. 

A cryptoasset will be defined as a digital representation of value that exists in a distributed ledger (such as a blockchain) and is secured cryptographically to record the ownership and transactions involving crypto assets.

As a result, fungible cryptoassets will be excluded from GST.

The relevant law changes will apply retrospectively from 1 January 2009, to precede the launch of the first cryptocurrency.

The definition excludes non-fungible tokens which will remain subject to GST if supplied by a registered person.

GST will continue to apply to supplies of goods and services which are bought using cryptoassets.

Cryptoassets that are economically equivalent to debt arrangements will still be taxed under the financial arrangement rules.

GST-registered businesses that raise funds through the issue of cryptoassets with features similar to debt or equity securities, will be able to claim input tax credits on their capital-raising costs.


Slide 8

Title: Invoicing and record keeping

Changes being passed which aim to modernise the GST rules for invoicing and record keeping.

This will allow more flexibility in the way that required GST information is shared between suppliers and their customers.

The proposed changes will not mean that business will have to stop using their existing systems.

Note: The relevant changes will not come into effect until 1 April 2023.

Notes

Some of you may have heard that there are also changes being passed which aim to modernise the GST rules for invoicing and record keeping.

These changes will not be coming into effect until April 2023. 

These changes seek to update the GST requirements for documentation, to allow for more flexibility in the way that the required GST information is shared between suppliers and their customers.

We’ll provide more information on these changes prior to them coming into effect.

In the meantime, I’d just like to highlight that these changes will not mean that business will have to stop using their existing systems, rather the changes are intended to provide business with more flexibility in an increasingly digital world.


Slide 9

Title: Other GST changes

Zero rate going concerns: Align the going concern rules with the land use rules

Apportionment agreements: Any registered person will be able to agree to an apportionment method with Inland Revenue.

Disposal of mixed-use assets: The cap will be removed on most deductions.

Notes

Now let’s take a look at the ‘other’ GST changes, there’s quite an assortment so we’ve got a bit of a list to get through.

Zero rated going concerns

Currently there is no requirement for a recipient of a zero-rated supply of a going concern to adjust for private or exempt use of the supply. This contrasts with zero-rated land sales where an adjustment is required for the portion of private or exempt use. To align the going concern rules with the land use rules, the changes will require purchasers of a going concern to determine if they will use the supply for a non-taxable use and return GST on the apportioned amount.   

Apportionment agreements

While in practise this restriction has often not been applied, there is currently a rule which prevents most businesses with a turnover of less than $24million from agreeing to a customised GST apportionment method with Inland Revenue. With the proposed changes, any registered person will be able to agree an apportionment method with Inland Revenue.  

Disposal of mixed-use assets

When a GST registered person disposes of an asset used for both taxable and non-taxable activities they can claim an additional input tax deduction in respect of their non-taxable use of the asset. Currently, this deduction is capped at the GST fraction of the purchase price paid when they acquired the asset. The changes will remove the cap on most deductions. The cap will remain in place for land disposed of by property developers as an increase in the value of land is directly related to their taxable activity. 


Slide 10

Title: Other GST changes

Wash up calculations: Goods and services that have had a complete change of use for longer than 2 years and have been subject to a full wash up will not require annual adjustments.

Second-hand goods: Input tax credit for second-hand goods acquired from an associated person in certain situations.

Body corporate exempt supplies: GST will not be charged on the portion of the levy that represents payment for exempt supplies.

Notes

Wash up calculations

Currently, a registered person is required to continue to perform annual adjustments for goods and services that have had a complete change of use and have been subject to a 'wash up'. A wash up calculation is applied when there has been a change to 100% taxable or 100% non taxable use of an asset for two adjustment periods. This amendment will provide clarification that a customer will become exempt from performing annual adjustments for goods and services that have had a complete change of use for longer than 2 years and have been subject to a full wash up.

Second hand goods

An amendment will allow for an input tax credit for second-hand goods acquired from an associated person in the following situations:

  • If the associated supplier has purchased the second-hand goods from a non-associated person then an input tax deduction would be allowed that would be equal to the tax fraction of that earlier purchase price from the non-associated person

  • If the associated supplier has purchased second-hand goods from an associated person then an input tax deduction would be allowed only if an earlier supply with a non-associated person can be identified after 1 October 1986. In this situation the input tax deduction allowed would be equal to the tax fraction of that earlier purchase price from the non-associated person.

Body corporate exempt supplies

When a GST registered unit title body corporate charges a levy to its members, it is deemed as being a taxable supply of services to the members, which means that they must charge and remit output tax on the Levy. The entire amount paid is considered a taxable supply even though a portion of the levy may be used to purchase exempt supplies, such as a lease on leasehold land. The proposed change means that the portion of a unit title body corporate levy that relates to the purchase of exempt supplies would not be treated as a service supplied to the member. This would mean that GST would not be charged on the portion of the levy that represents payment for exempt supplies.


Slide 11

Title: Other GST changes

Deduction notices: IR will be able to collect GST debt from members of unincorporated bodies.

Non-statutory boards: Will be treated the same as statutory boards

Commissioner assessments: Commissioner assessments for a time-barred GST return will be treated as a disputable decision

Notes

Deduction notices

Members of unincorporated bodies are jointly and severally liable for the obligations of the unincorporated body. Currently, an issue in the GST Act prevents IR from being able to recover outstanding GST debt from members. A proposed amendment will correct this issue to allow for us to collect GST debt from members through a deduction notice – regardless of whether the member who incurred the debt is registered for GST or not. 

Non-statutory boards will be treated the same as statutory boards

Section 6 of the Goods and Services Tax Act 1985 defines the meaning of the term taxable activity and what activities are not included in this definition.

Currently, the list of activities excluded from being considered a taxable activity includes the following - Any engagement, occupation or employment as a Chairman or member of any local authority or any statutory board, council, committee or other body, subject to subsection 4. This has meant that the legislation is not consistent with its intent as it results in different GST treatment for statutory boards (e.g. local authorities) compared with non-statutory boards (e.g. community boards). An amendment will remove the word 'statutory' which will ensure that when a natural person who is a registered person provides services to local authorities, boards, committees, any other council, they will be treated the same for GST purposes. 

Commissioner assessments

Under the current law, a Commissioner assessment can only be challenged under a judicial review process. The proposed amendment would treat Commissioner assessments for a time-barred GST return as a disputable decision bringing this into align with the treatment of Commissioner assessments for time barred periods for income tax. 


Slide 12

Title: Other GST changes

Zero rating of land rules: Clarification on how adjustments are to be made when an error has been identified.

Knowledge offence replaced: Knowledge offence penalty for issuing multiple tax invoice repealed and replaced by the strict liability penalty.

Change basis for calculations: Customers can request to change the basis for calculating GST for a taxable period to match their internal accounting cycle.

Notes

Compulsory zero rating of land rules

Clarification will be added so outline that when a customer identifies an error in relation to their business (B2B) compulsory zero-rating of land rules and the purchase should not have been zero-rated the adjustment is to be made in the period the error was identified rather than a retrospective amendment to the transaction date.

Knowledge offence

A supplier of goods and services issuing multiple tax invoices for the same supply is committing a criminal offence (A knowledge offence). Currently, conviction for a knowledge offence can lead to a maximum sentence of 5 years in prison or a fine of up to $50,000, or both, for each offence. 

The knowledge offence penalty for issuing multiple tax invoices is being repealed and is being replaced by the strict liability penalty.

This strict liability penalty will apply to those who claim an input tax credit more than once for the same taxable supply.

It will only apply if reasonable care has not been taken or the supplier has already self-corrected multiple input tax deduction claims in subsequent GST returns.

Existing guidelines will be used to determine if reasonable care has been taken. 

And our final change for GST - customers will be able to request to change the basis for calculating GST for a taxable period to match their internal accounting cycle.

This amendment will allow for a registered person to apply to IR to be able to use their accounting cycle as the basis for calculating GST payable for a taxable period. This change is intended to support customers that have, for example a 4-week-4-week-5-week accounting cycle, this will work by assigning each cycle to the existing 1-/2-or 6- monthly GST filing periods.


Slide 13

Title: Fringe benefit tax

Notes

That brings us to the end our of GST changes, so now let’s take a look at our second topic – Fringe Benefit Tax.


Slide 14

Title: New calculation

New fringe benefit tax (FBT) calculation: Pooled Alternate Rate Option

Classify benefits as either attributed or non-attributed.

Attributed benefits are subject to a flat rate of either 49.25% or 63.93%, depending on the employee’s pay and the value of benefits attributed to them.

All non-attributed benefits are subject to the flat rate of 49.25%, or 63.93% where one or more recipients is a major shareholder-employee.

Notes

It is proposed that a new fringe benefit tax (FBT) calculation, Pooled Alternate Rate Option, be introduced.

Under this option you classify benefits as either attributed or non-attributed.

Attributed benefits are subject to a flat rate of either 49.25% or 63.93%, depending on the employee’s pay and the value of benefits attributed to them.

If you know that an employee has received less than $129,681 in net cash pay plus attributed benefits (all-inclusive pay) for the year then you may apply the 49.25%. For those over this threshold the rate of 63.93% would apply.

In the situation when attributed benefits are taxed at the 49.25% rate for some employees and at the 63.93% rate for others, two pools for attributed benefits may be necessary.

All non-attributed benefits are subject to the flat rate of 49.25%, or 63.93% where one or more recipients is a major shareholder-employee.

Two pools for non-attributed benefits may also be necessary in this situation.

Submissions for a ‘safe-harbour’ rule have been received to allow for easier determination of when an employee qualifies for the 49.25% rate. FEC is considering this.   


Slide 15

Title: Unclassified benefits

There will be clarification of the categories of unclassified benefits that employers may be liable for when providing fringe benefits.

Notes

There will also be clarification of the categories of unclassified benefits that employers may be liable for when providing fringe benefits. For example, clarification on the liability of unclassified benefits provided by associates. 


Slide 16

Title: KiwiSaver

Notes

And now on to our final topic – KiwiSaver. Let’s take a look at the changes that are coming to simplify KiwiSaver for employees and employers. 


Slide 17

Title: Time bar

No longer able to amend Employment information if it has been 4 years since the return was filed

Changes can still be made for student loan and/or child support deductions   

Notes

In regard to KiwiSaver, you should first know that you and your clients will no longer be able to amend their Employment information – IR348 returns in myIR or gateway filing, if it has been 4 years since the return was filed due to time bar. 

You and your clients can still request changes outside the 4 years to be made for student loan and/or child support deductions using the Employment information amendments – IR344.


Slide 18

Title: Returning employer contributions

A new process for returning employer contributions to the employer account when an employee is no longer a KiwiSaver member.

If an employee has opted out of KiwiSaver or an invalid/incorrect enrolment, any employer contributions made will be refunded or offset against any amount outstanding. 

Notes

Another change that’s coming for KiwiSaver is that if an employee has opted out of KiwiSaver or an invalid/incorrect enrolment, any employer contributions made will be refunded or offset against any amount outstanding. 

The amount may be offset against debt if they have money owing as prior to the legislation change the employer would be refunded to the employer even if they had debt.   

A letter will still be sent advising which employer contributions and for which employee have been returned to the employer account. These amounts will be offset against any amount outstanding or any balance remaining refunded. 


Slide 19

Title: KiwiSaver employee contributions

New ways for employees to request contribution rate changes:  myIR and their KiwiSaver scheme provider

List of contribution rate changes sent weekly

Employers are not required to make a contribution rate change more than once every 3 months.

Notes

KiwiSaver members who make contributions through deductions from their salaries and wages will have more ways to request changes to their KiwiSaver contribution rate. 

In addition to requesting a contribution rate through their employer(s), they will be able to request a change to their contribution rate through their myIR account or by contacting their Kiwisaver scheme provider.

We will send employers or their intermediaries a letter with a consolidated list of contribution rate changes that we receive from employees and scheme providers on a weekly basis. 

Employees can submit as many rate changes as they like – If they submit multiple in one week, we will only send employers the latest request received for the week.  

I’d just like to add, that employers are not required to make a change more than once every 3 months unless they have agreed to a shorter timeframe. 

Please note that if an employee is on a savings suspension, they can only choose a new rate directly with their employers.

Employees will be able to see their current contribution rate in myIR - if you get any questions, the current contribution rate shown in myIR is calculated based on the information provided in the last Employment Information (EI) return i.e their total earnings and their KSE contributions.


Slide 20

Title: Thank you

To view our other webinars, visit www.ird.govt.nz/2022-changes

If you have any questions about our webinar, please email [email protected]

Notes

That brings us to the end of our presentation.

If you want to find out more about the upcoming changes go to www.ird.govt.nz/2022-changes.

If you have any questions about our webinars, please send them to [email protected]

Thank you for you for joining us, ngā mihi.

Last updated: 06 Mar 2022
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