Introducing GST changes coming in 2022
The information in this presentation is current as at 23 March 2022
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Introducing the 2022 annual changes
- Goods and services tax
Kia ora Koutou,
Greetings everyone, my name is Rata Kamau and I am an Account Manager for Inland Revenue.
Last year, the Minister of Revenue introduced the Taxation (Annual Rates for 2021–2022, GST, and Remedial Matters) Bill.
The Bill includes an assortment of proposed changes which are expected to take effect on or before the 1st of 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.
While most of these are minor changes, some will be of interest for businesses and employers. In this webinar, we will focus specifically on changes to Goods and Services Tax, or GST.
We also have a separate webinar for businesses and employers that gives an overview of other key changes to be aware of, such as for KiwiSaver and Fringe Benefit Tax, or FBT.
With that, let's get started on what will be changing with GST.
Title: GST changes for mixed taxable use
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.
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.
First, let's take a look at the GST changes when it comes to making adjustments for taxable and non-taxable use:
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 2 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.
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 $24 million 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.
Title: Other GST changes
Second hand goods
Input tax credit for second-hand goods acquired from an associated person in certain situations.
Change basis for calculations
Customers can request to change the basis for calculating GST for a taxable period to match their internal accounting cycle
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.
Change basis for calculations
Also, 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.
Title: Importing and exporting goods
Businesses who deliver goods to NZ residents who then export the good outside the country to non-residents will be able to zero-rate the supply.
The domestic leg of the transport of goods that are being exported or imported can be zero-rated.
There are two key GST changes for importing and exporting.
The first change will mean if you're a business who delivers goods to New Zealand residents who then export the good outside the country to non-residents, then you'll be able to zero rate the supply. 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 subcontracted 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.
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.
More information is on the IR website.
Note: The relevant law changes will apply retrospectively from 1 January 2009.
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 the 1st of 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 the supplies of goods and services which are bought using crypto assets.
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
More information is on the Inland Revenue website. Just search using the key term 'cryptoassets'.
Title: Invoicing and record keeping
Changes are being passed to modernise the GST rules for invoicing and record keeping.
Proposed changes will not mean that businesses will have to stop using their existing systems.
Note: The relevant changes will not come into effect until 1 April 2023.
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.
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]
This has been an overview of some of the changes to GST likely to be of interest to businesses and employers.
If you want to find out more about the full range of 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 taking time out of your day to join us,
Ngā mihi nui. Ka Kite ano, bye for now.