Audio and visual transcript
Kia ora koutou and welcome to this webinar. My name is Rata Kamau, and I'm an Account Manager at Inland Revenue.
In this presentation I'm going to be taking you through the changes that are coming in April for GST.
This includes the new invoicing and record keeping rules, proposed changes to the apportionment and adjustment rules, some clarifications for business-to-business compulsory zero-rating of land rules, and a couple of other changes too.
The information in this presentation is current as of the 16 of March 2023.
Now let's start by looking at the GST invoicing and record keeping changes.
The rules for GST invoicing and record keeping are changing from the 1st of April 2023.
The new requirements are designed to allow greater flexibility, so keeping GST records is about to get easier.
Before we move on to look at the new rules, I think it's important to note that if your invoicing practices are compliant with the current rules, they will comply with the new rules.
How you calculate GST is not changing, only the rules relating to invoicing and record keeping.
The requirement to use tax invoices is being replaced by a more general requirement to provide and keep certain records known as 'taxable supply information'.
This means there will no longer be a requirement to provide and keep a single physical document holding the taxable supply information, such as a tax invoice, credit note, or debit note.
To reflect this, the term 'taxable supply information' will replace the current term 'tax invoice'. 'Supply correction information' will replace the current terms 'debit note' and 'credit note', and 'buyer-created taxable supply information' will replace 'buyer-created tax invoice'.
Taxable supply information refers to the minimum set of information buyers and sellers need to keep as evidence of a transaction.
The taxable supply information you need to provide or keep depends on the value and the type of supply. We'll go into more detail on this shortly.
You can continue to use tax invoices to satisfy the taxable supply information requirements, but the new rules will also mean that the information can also be held in other forms, such as supplier agreements, contracts, and bank statements.
When the new rules come into effect, the words 'tax invoice' will no longer need to be shown. So the documents you receive from the 1st of April may look different to what you are receiving today.
Businesses can still choose to use the wording tax invoice, but they may choose to update this to taxable supply information, invoice or to not name their documents at all.
As I mentioned earlier, if you would prefer to continue providing taxable supply information in a single document marked as a 'tax invoice', you can.
The taxable supply information you need to supply or keep depends on the value and the type of supply.
From the 1st of April 2023, the 3 threshold requirements for GST supplies are:
- $200 or less
- More than $200 and up to $1,000, and
- More than $1,000.
The amount of information required increases as the value of the supply increases, but the information required under these new rules is generally less than is required under the current rules.
For supplies of $200 or less, taxable supply information includes the seller’s name or trade name, the date of invoice, or where no invoice is issued, the time of supply, a description of the goods or services, and the total amount payable. This information could be contained in an invoice, or it could be contained in your business records.
This example shows an invoice, but in a lot of cases for these low-value transactions, a till receipt will meet the requirements for both buyer and seller.
For supplies of more than $200 and up to $1,000, your taxable supply information must show all the previous details, plus the seller's GST number, and a clear indication of the amount of GST included in the sale price.
For supplies of more than $1,000, your taxable supply information must show all the previous details, plus information to identify the buyer of the goods or services.
The taxable supply information does not need to include details relating to the quantity or volume of the supply.
However, this information should be captured elsewhere in your business records.
Supplier groups, secondhand goods and certain imported goods and services have their own taxable supply information requirements. You can find out more about these requirements at www.ird.govt.nz/gst-invoicing-changes
For supplies of over $200, taxable supply information must be provided to GST-registered buyers within 28 days of a request (or by an alternative date agreed to by the parties).
For supplies of $200 or less, sellers are required to keep a record of the supply, but they are not required to provide taxable supply information. The buyer will be responsible for keeping their own records.
If you have a problem meeting the requirements because you can't provide a particular piece of information, you can apply for approval to provide other information instead. You can do this by sending us a message in myIR. Previously this was known as applying for a modified tax invoice.
An example of when this may apply, is the sale of goods via an app where the app does not have a field for the buyer to enter their address and this field cannot be added.
If you already have a modified tax invoice arrangement, that has been approved by Inland Revenue, this can continue to be used for taxable supply information.
A new strict liability offence has been introduced to prevent buyers from claiming multiple input tax credits for the same taxable supply. This replaces the previous knowledge offence penalty that applied to sellers who knowingly issued multiple tax invoices for the same taxable supply.
It will not apply if the person took reasonable care when claiming the input tax or corrected the amount claimed under section 113A of the Tax Administration Act.
From the 1st of April 2023, there will be more situations where supply correction information must be provided.
Supply correction information must be provided when the taxable supply information includes incorrect information, or when the seller has included an incorrect GST amount in their GST return.
Examples of when corrections may be required, include where:
- The supply is cancelled.
- All or some of the goods are returned to the seller.
- Some of the goods were not delivered to the buyer.
- There is an incorrect description of the goods or services.
- Incorrect seller information included.
- Incorrect buyer details included.
- The date is incorrect.
- GST is calculated at the wrong rate.
- An incorrect GST amount is charged.
You must retain supply correction information with the following details:
- The seller’s name (or trade name) and GST number
- The date the correction was provided
- Information identifying the taxable supply information (for example, an invoice number)
- The correction to the taxable supply information including, if relevant, a correction to the amount of GST charged for the supply.
To get yourself ready for the changes, we suggest you:
- Familiarise yourself with the new rules. The changes are designed for greater flexibility, so invoicing practices compliant with the current rules will comply with the new rules. However, even if you decide not to adopt the changes, if your suppliers do then you could be affected.
- Identify how these new rules may impact your business processes and systems. If you use third party software, please talk to your provider about how they are incorporating these changes into their software.
- Determine what changes you may need to make to be ready for April.
If you have a tax agent, you may like to talk to them about what these changes will mean for you.
That's the end of the changes of the GST invoicing and record keeping changes. Now we'll go through the apportionment and adjustment rule changes.
There are several proposed changes to the Goods and Service Tax (GST) apportionment and adjustment rules.
These are intended to reduce compliance costs and better align the rules with current practices.
The changes will also mean that we will be able to agree to alternative apportionment methods, that are fair and reasonable, with GST-registered persons and publish other acceptable methods.
The first change to mention, is that there will be a new principal purpose method for goods and services that are acquired on or after 1 April 2023 and have a value of $10,000 or less (GST exclusive).
The method will allow you to claim the full GST amount when the principal purpose of acquiring the good or service is making taxable supplies.
You can choose to continue to apportion assets purchased for $10,000 or less based on the extent they are used to make taxable supplies, instead of using the principal purpose method.
If you choose to continue to apportion assets, this option will remain in effect for a minimum of 24 months for all goods and services.
Currently, you need to adjust the GST claimed if the amount of taxable use of a good or service changes by more than 10%, or if the amount of the adjustment required is more than $1,000.
To do this, you need to review the taxable use over an adjustment period, and the number of adjustment periods you need to review the taxable use for, depends on the GST-exclusive cost of the asset.
From the 1st of April, the adjustment period value thresholds will increase, as shown in the table.
These increases will mean that the period of time that you need to monitor assets for, will be reduced, and fewer adjustments will be required.
From April, you will be able to elect to treat goods that were not acquired or used principally for making taxable supplies as non-taxable when they are sold or disposed of.
This is unless you have already claimed GST deductions for the asset. If you have claimed GST deductions, you can repay any GST previously claimed, before 1 April 2025, to satisfy this condition.
Or unless the asset was acquired as zero-rated, either as a going concern or consisting of land. To satisfy this condition, you can return the nominal GST amount in your next return.
This election is expected to be used for dwellings which have a small amount of taxable use, such as farmhouses or home offices. The proposed change applies retrospectively and is likely to reflect typical GST practices for these types of dwellings.
There are also proposed changes to the wash-up rule.
From the 1st of April a wash up calculation can be completed for any permanent change in use at the end of the adjustment period (the income year) that the change occurs in.
This will mean you can claim a deduction for increased business use of an asset sooner and in more situations.
Previously, wash up calculations could only be completed at the end of the adjustment period that followed the adjustment period that the change occurred in. This meant it was more than a year later, and only if the use of the asset changed to either fully taxable or fully non-taxable use.
The final proposed change for apportionment relates to the sale or disposal of assets.
If you sell or otherwise dispose of an asset you have previously claimed GST for, you will need to account for GST on the sale or disposal, unless you have already returned the GST claimed/nominal GST component of zero-rated acquisitions. This applies whether the asset was used in your taxable activity or not. It will also apply if you cease to conduct a taxable activity or deregister from GST.
If Inland Revenue considers that a GST-registered person has artificially increased their non-taxable use and made a change in use adjustment in anticipation of sale or disposal, the sale or disposal will need to have GST accounted for.
The GST compulsory zero-rating of land rules apply to supplies that are wholly or partly of land, provided they are:
- between 2 GST-registered businesses
- intended for use in making taxable supplies, and
- not intended as a principal place of residence for the recipient or their close family members.
Some of these rules are being clarified or amended to ensure they work as intended.
Supplies wholly or partially consisting of the grant of a lease of land can be zero-rated provided they meet the requirements for zero-rating. This is intended to capture the situation where the purchase of business assets by a GST-registered person is made conditional on the grant of a lease over the business premises.
Only irregular payments made pursuant to a lease agreement and totaling more than 25% of the total lease agreement are zero-rated. All regular payments under the lease agreement will have GST charged at the standard rate of 15%.
And finally, we are clarifying the application of a special rule that requires the recipient of a supply to pay the GST that should have been charged. This rule will only apply in situations when it's found that zero-rating has been applied incorrectly due to the recipient providing incorrect or insufficient information.
There are a couple of other, smaller, changes for GST. I'll quickly go through the list now.
Voluntary administrators will be liable for the GST obligations of the GST-registered person during the period of voluntary administration.
Public authorities will be required to account for GST when they receive government grants and subsidies.
Unincorporated joint ventures and their members will be defined as 'associated persons' for GST purposes.
That brings us to the end of our presentation. Thank you for taking time out of your day to listen to this webinar.
If you want to find out more about the upcoming changes go to ird.govt.nz/aprilchanges
If you have any questions about our webinars, please send them to [email protected]
Thank you for you for joining us, ngā mihi.