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What
Options in light of COVID-19 around registration, GST on cancelled supplies and GST adjustments for change-in-use asset use.
Who
GST-registered persons

We understand that COVID-19 will have a huge impact on our customer’s businesses. For people who are GST-registered there are tax implications where supplies are cancelled or there is change of use of an asset. Some customers may need to cancel their GST registration.

GST on cancelled supplies

If you have returned GST on a supply that is subsequently cancelled, an entitlement to a GST adjustment arises in the period in which it becomes clear that the output tax returned is incorrect, for example, the period in which the reimbursement was made.

Where a tax invoice was originally issued for the supply, a credit note for the cancellation of the supply will also need to be raised to support any GST adjustment made.

If, as a result of the cancellation of significant or multiple supplies, you make a claim for loss of income (or similar) insurance, the receipt of any insurance pay-out will be subject to GST as it is a deemed supply under section 5(13) of the GST Act.

GST adjustments for change-in-asset use

If a particular asset is not being used at all for a period of time then there are unlikely to be any change of use or apportionment adjustments required for GST purposes.

If an asset such as a vehicle, is used both for business and private purposes and an actual use calculation is above the threshold to require an adjustment at the end of an adjustment period. This is due to the fact that the asset could not be used for normal business use during the COVID-19 alert level 4 period. IR will apply a practical approach in accepting calculations that provide a fair and reasonable result in the circumstances.

GST registration cancellations

If your business shuts down due to the COVID-19 Alert Level-4 situation you may need to deregister from GST.

If a taxable activity has ceased the registered person should seek de-registration within 21 days of cessation. However, whether or not a taxable activity has ceased will depend on the facts of each case.

After a period of making regular or frequent taxable supplies, making no taxable supplies for a 12-month period may be indicative of the taxable activity having ceased but it will depend on what other activities relating to those supplies or future intended supplies has occurred or will occur. For example, things done in relation to ending the taxable activity such as closing down operations or honouring warranty obligations for prior supplies are part of the taxable activity.

Where a taxable activity has ceased and de-registration is appropriate, de-registration adjustments to return GST on any assets retained from the activity will be required.

Changing GST taxable period from 6-months to 1-month

Usually when a taxable period is changed from six-month to a one-month taxable period the change will take effect from the end of the taxable period in which they apply. 

Because of the impact of COVID-19 you may now want to file on a 1-monthly basis to get any GST refunds earlier. If you change your taxable period from 6-months to 1-month the change will now be effective from the start of the taxable period that you apply for.

This means the change to your taxable period will take effect much sooner.

This may apply to you if you:

  • have a standard balance date
  • apply on or after 1 October 2021
  • would usually have to wait until 1 April 2022 for a change of taxable period to take effect.

For more information refer to

Variation of section 15D(2) of the Goods and Services Tax Act 1985 for applications to change GST taxable period

Last updated: 12 Jul 2021
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