Special supplies are different from the normal business sales or purchases.
The supply of accommodation in a dwelling (such as a residential tenancy) is exempt from GST.
GST-registered hotels, motels, other commercial dwellings, hospitals or short-term accommodation providers must charge GST on domestic goods and services.
If you're a GST-registered provider, and your guest stays for 4 weeks or more, how you calculate the GST on the accommodation depends on whether it's a residential establishment or not.
Here are the full details.
A supplier who receives advance or progress payments must account for GST on the payments.
For example, a payment from a marketing board to a grower is accounted for as follows:
The grower includes the payment in their total sales in the GST return period they receive it.
If, for some reason, they have to pay back all or part of the advance, it will be treated as a loan. The advance will be exempt from GST because it is a financial service.
The grower should ask us to amend the return that included the advance payment.
The marketing board may claim a GST credit for the advance payment made, if they hold sufficient records.
If the advance is later repaid, the repayment must be included in the total sales. Any interest is exempt, as it is a financial service.
A GST-registered agent who is involved in the transaction must account for GST on any commission or fee.
Special rules apply if a New Zealand agent who is registered for GST acts on behalf of a non-resident principal who is outside New Zealand, and not registered for GST.
New Zealand agent buying supplies for a non-resident principal
The agent may, in certain circumstances, claim GST incurred when importing or exporting goods to or from New Zealand or arranging transportation.
Non-resident principal contracts services agent to sell and distribute their goods
In some cases, a non-resident, non-registered principal may wish to sell goods in New Zealand but does not want to have a place of business here. They may contract the services of an agent to sell and distribute their goods.
If the New Zealand GST-registered agent and the principal agree, the agent is responsible for returning GST on the sale of the goods instead of the non-resident. The agent can claim GST incurred when importing the goods into New Zealand.
A non-resident art gallery decides to sell several pieces of art in New Zealand. The gallery arranges for a GST-registered agent in New Zealand to carry out the sale. The agent agrees to act as the supplier and importer of the artwork for the art gallery. The agent may claim for any GST paid to import the goods and is responsible for charging GST on the sale of the artwork in New Zealand.
Who owns the goods
Ownership of goods under auction never passes to the auctioneer.
The auctioneers sell goods on behalf of other people, called principals. The auctioneer may not know whether the principals are registered for GST, or whether to charge GST on a particular lot.
Charging GST on the goods
The sale of goods on behalf of a non-registered principal is not taxable. The sale of a registered person's private assets is generally not taxable.
The auctioneer can charge and account for GST as though making the taxable supply, as long as both principal and auctioneer agree to this arrangement.
If the principal is registered, the GST-inclusive sale price, less commission, is passed on to the principal who must account for GST.
If the principal is not registered, the auctioneer will pass the GST-exclusive sale price, less commission, on to the principal.
An auctioneer who is registered for GST must account for the GST on fees or commissions.
Auctions may be conducted on either a GST-inclusive or a GST-exclusive basis. It should be stated at the beginning of the auction, so the bidders know if their bids include GST.
Supplying goods or services through a coin-operated device or machine
If you supply goods or services through any coin-operated device or machine, such as a video game, snack machine or parking meter, you must account for the total value of the coins removed from the machine.
Include the amount in the return covering the date you removed the coins.
Making a supply through a token-operated device or machine
If you make a supply through a token-operated device or machine, you account for the tokens in the same way as other tokens, stamps or vouchers. The supplier should treat the token as a supply for GST purposes at the time the customer buys them.
Receiving business goods or services through a coin or token-operated machine
If you receive business goods or services through a coin or token-operated machine, you may claim a GST credit in the period you paid the money.
If you're a door-to-door salesperson
The time of supply is the first day after the period the purchaser may cancel the sale in. Your buyers have either 7 days or 1 month to cancel the sale, depending on the cancellation period.
You account for the supply in the taxable period covering the day after the final date for cancellation.
For example, a door-to-door salesperson, sells an item on 31 May, the last day of the taxable period. The 8th day after the sale is 8 June. They include the full price for the supply in the taxable period covering 8 June.
Purchasing from a door-to-door salesperson
You can claim a credit in the return covering the first day after the cancellation period, provided you hold sufficient records.
This applies even if you get an invoice or make payment before that date.
Time of supply for GST
The time of supply rule you need to use depends on the type of finance lease.
- For an agreement to hire, treat each supply as taking place at the earlier of when a payment is due or when you receive it. An agreement to hire is a financial arrangement where each payment or instalment is treated as a separate supply for GST purposes and the goods are treated as supplied with each payment or instalment during the life of the arrangement.
- For a hire purchase agreement, the time of supply is the time you entered into the agreement.
- For any other finance lease, the ordinary rule applies. The time of supply is the earlier of the time the supplier issues the invoice or receives a payment for that supply.
Calculating the GST
The GST part of the payment is calculated based on the cash price of the goods under the arrangement. Multiply the amount of payment by 3, divide by 23 to work out the GST.
The difference between the cash price and the total amount you pay under the finance lease is the finance charge. These are exempt from GST.
If payment for goods or services is made in a foreign currency, convert it to New Zealand dollars using the exchange rate applying at the time the goods or services were supplied.
To claim a GST credit, you must hold sufficient records to support the New Zealand currency amount.
Sometimes a final price is not settled until after the goods are physically supplied.
If you are selling goods where the full price is not known and you use the invoice or hybrid basis, include the GST for the known price in the earliest taxable period:
- an invoice is issued for any part of the supply
- when a payment is due
- when a payment is received.
If you purchase goods where the full price is not known, and you use the invoice basis, claim the GST for the known price in the earliest taxable period:
- you receive an invoice for any part of the supply
- you make a payment
- a payment is due.
Include the total amount invoiced, due or paid.
For purchases under the payments or hybrid basis, you claim a credit when you make a payment.
Gaming machines are constructed, designed or adapted for use in gambling.
Gaming machine duty and GST
If you operate gaming machines, you should be registered for and pay gaming machine duty for each calendar month for all machines.
You must also pay GST on the value of the gaming machine revenue, based on:
- the increase in metered turnover
- less the increase in metered total wins during a return period.
If the jackpot figure is not included in the metered total wins, then the amount of any jackpots won during the return period is also deducted from total turnover.
Calculating gaming machine revenue
Calculate the gaming machine revenue for GST purposes from the information provided in the record keeping requirements for the Department of Internal Affairs.
If your monthly machine analysis reports or cashless gaming machine analysis reports are prepared to coincide with the last day of your taxable periods, the report(s) can be used to calculate the gaming machine revenue.
Paying problem gambling levy
A problem gambling levy is also payable on gaming machine profits. The problem gambling levy is calculated at 1.08% of all gaming machine profits plus GST. You may claim back the GST on problem gambling levy.
People on the invoice basis claim GST in full in the period any payment is made or invoice received.
People on the payments basis claim GST in the return when a payment is made.
Grants and subsidies from the Crown or public authorities are considered to include GST if the recipient is registered for GST. Include the full grant or subsidy in the 'Total sales and income' section of your return.
An exception is grants intended for overseas use for international development. You will have to return GST only on the portion of the grant allocated for administration and capacity building in New Zealand.
Taxable supply information
If you get a grant or subsidy from a government department, you do not normally need to provide taxable supply information. However, if you get a grant or subsidy, such as a research grant from another registered person, you will probably be asked to provide taxable supply information.
If you pay a grant or subsidy in exchange for taxable supplies, you may ask for taxable supply information and claim a GST credit as usual.
George employs 10 staff. He receives a wage subsidy of $200 per week for 8 weeks. The GST content would be $208.69.
$200 x 8 (weeks) = $1,600
$1,600 x 3/23 = $208.69
George includes $1,600 with sales in his return.
Hire purchase sales
You must account for all hire purchase sales in the taxable period covering the date you enter into the agreement. This rule applies to whichever accounting basis you use.
Buying goods on hire purchase
If you buy goods on hire purchase, you may claim a deduction in the taxable period covering the date you enter into the agreement. This rule applies to whichever accounting basis you use.
Calculating the GST component
The GST component of the payment is calculated based on the cash price of the goods under the arrangement. Multiply the amount of payment by 3, and divide by 23 to work out the GST.
The difference between the cash price and the amount of instalments you must pay, are finance charges. These are exempt from GST.
Rebecca sells a carpet on hire purchase to Emily on 7 June. The cash price is $550 including GST.
The agreement is for 36 monthly payments of $23, totalling $828. Rebecca accounts for the sale on the cash price of the goods ($550) in the period covering 7 June.
Emily also claims for her purchase on the cash price of the goods ($550) in the period covering 7 June. The difference of $278 is the finance charge, which is an exempt supply.
GST applies to certain supplies of services imported to New Zealand. For example:
- legal and accounting services
- products downloaded online.
If you are receiving imported services from an overseas supplier you may need to account for GST on the cost of the services, whether you are currently registered for GST or not. This is called ‘reverse charge’.
The reverse charge requires you to pay GST of 15% based on the price of the services.
The reverse charge applies if the intended percentage of use or the actual taxable use of the imported services is less than 95% of the total use. There are special provisions if you are receiving the imported services from a non-resident member of the same GST group.
A person required to pay GST under the reverse charge is treated as the supplier of the services for registration purposes, payment of output tax and record keeping.
Accounting for and paying the GST
You include the GST amount in your return and pay it to us if all the following apply.
- Services are supplied by a non-resident supplier to a New Zealand-resident consumer.
- Services are acquired by a person who estimates at the time of acquisition that the percentage of intended taxable use is less than 95%, or determines at the end of the adjustment period that the percentage of actual taxable use is less than 95%.
- The supply of services would be a taxable supply if it were made in New Zealand by a registered person in the course of their taxable activity.
You may need to register for GST
If you are not registered for GST and the value of imported services takes your turnover above the $60,000 threshold, you will have to register for GST.
If you receive an insurance payment relating to your taxable activity, you must include the GST content as an adjustment in the return covering the time you received the payment.
What you don't need to account for
Some accident compensation receipts do not need to be returned. However, the insurer will still charge GST on the premiums for this type of cover.
You do not have to account for payments received under a life insurance contract, as the insurer cannot charge GST on the premiums.
What insurers can claim for
Some types of insurance premiums are liable for GST, such as fire and general insurance. A registered insurer may claim deductions for payments to policy holders when they are made.
The insurer needs to keep records to deduct any other payments for claims on policies, such as a payment to a panelbeater for repairs to an insured vehicle.
An insurer cannot claim for payments made under life insurance policies.
Graham's distilling equipment was damaged by fire on 20 January. On March 18 his insurance company pays $4,600 for the damage.
Graham includes an adjustment for $600 ($4,600 x 3 divided by 23) in his return covering 18 March.
Time of supply
For GST purposes, the time of supply is the date the title of the asset passes to the purchaser. If the sale is cancelled and the seller keeps part of the money, the time of supply is the date of cancellation.
Accounting for the payments
Include the full cost of a layby sale in the return period the purchaser takes ownership of the goods. This is the time of the final payment.
Even if you use the payments basis, do not account for the lay-by payments as you receive each one, but wait until you receive the final payment.
For example, Marilyn buys an electronic keyboard on layby from Music Ltd in January. The full price is $560. Marilyn pays $160 deposit, and instalments of $200 in February and March. The keyboard is delivered in April. Marilyn accounts for GST in her return covering March, when the final payment was made and ownership changed.
When a lay-by sale is cancelled
If a layby sale is cancelled and the retailer keeps some of the payments already made, or receives payments later, this amount is accounted for in the return for the period the sale was cancelled in. GST is calculated on the full amount kept, or received later, and must be included in the return.
For example, Marilyn (see above example) cancels the agreement in February and is refunded $300. She loses $60. Music Ltd accounts for it in the GST return covering February.
If you buy goods on layby, you may claim a deduction when you have paid for them in full. You need sufficient records to support the deduction.
If you cancel a layby sale, you may claim 3/23 of any cancellation charge the supplier makes, in the return period you cancel it, as long as you hold sufficient records to support the cancellation charge.
Charges you are required by law to pay, including fees and levies, are subject to GST unless they are a fine, penalty, interest or general tax.
Local authorities are the only registered persons who charge rates.
Using the invoice or hybrid basis
A local authority using the invoice or hybrid basis accounts for rates charged in full.
The time of supply for rates is the earliest of the:
- date of an instalment notice for a single payment
- due date for payment
- date when payment is received.
Using the payments basis
Using the payments basis, the authority accounts for all payments of rates at the time they receive them whether they are paid in 1 instalment or several.
Registered persons claiming GST
Registered persons may claim GST for payments of rates for premises used in a taxable activity.
If you use the invoice basis and you pay rates in 1 lump sum, you may claim a GST credit when you make the payment or receive an invoice, whichever is earlier. If you pay rates in instalments, you may claim the GST when each instalment is due or paid, whichever comes first.
For the payments and hybrid basis, you claim the GST for rates when you make payment, provided you hold sufficient records.
If you run raffles, lotteries, or other games of chance, you must account for the proceeds of the lottery, such as total sales of tickets or cards, less the total amount of cash prizes.
For example, if the total proceeds were $1,070 and total cash prizes were $800, the difference of $270 must be included in your total sales and income of the return covering the date the raffle was drawn.
If a raffle has several draws, account for the GST in the return covering the date of the first draw.
You may claim GST on the purchase of non-cash prizes in the normal way, as long as you hold sufficient records.
When a supplier receives a deposit under a contract, the general time of supply will be triggered. This applies equally to conditional or unconditional contracts.
Where there is no binding contract or agreement, the supplier must show that the payment is for the supply of goods or services, whether it occurs now or in the future.
Deposits paid to stakeholders
When a deposit is paid to a person as stakeholder, time of supply is not triggered as there is no receipt by the supplier.
A supplier may be a stakeholder. A stakeholder holds the deposit on behalf of both parties and owes a contractual obligation to both parties.
A stakeholder relationship requires agreement by all parties. A person cannot declare themselves a stakeholder unilaterally.
Sometimes the price of goods or services will change after an invoice has been provided or a payment made.
Reduction of the agreed price
If you supply goods and services and reduce the price of the supply after providing taxable supply information or receiving payment, you must include the amount of the reduction in the return period it was made in. This is usually the return when the supply correction information was issued.
If you have already provided taxable supply information, you must also provide supply correction information.
If you’re the buyer, you must include the reduction shown on the supply correction information in the return period covering the time of reduction. This is usually the period the supply correction information was received.
Increase of the agreed price
If you supply goods or services and increase the price of the supply after providing taxable supply information or receiving payment, you must include the amount of the increase in the return period it was made in. This is usually the return for the period you provided the supply correction information.
If you have already provided taxable supply information, you must also provide supply correction information for any increase in price.
The buyer, must include the supply correction information in the return covering the time the increase was made. This is usually the return for the period the supply correction information was received.
In July, Kevin sells cleaning goods to Maria for $1,000. Maria pays Kevin $900 as some goods were damaged.
In his next GST return period, Kevin issues supply correction information for the difference of $100. Both Maria and Kevin use the invoice basis.
Kevin includes $1,000 in his total sales in the return he sold the goods. Kevin then claims $100 in his purchases and expenses in his return covering when the reduction was made.
Maria claims $1,000 in purchases in the return she received the goods and later includes $100 in the total sales in the return covering the time when the reduction for damage was made.
If the taxable supply information and supply correction information were issued in the same return period, Kevin could have shown the net amount of $900 in his total sales instead. Maria could claim the net purchase of $900.
This example of how adjustments are made also applies to an increase in price.
If you are a registered person and you purchase a taxable activity that includes a dwelling, the dwelling may be treated as a separate supply.
To be able to claim a GST credit in this case, you must show the extent the dwelling is used in the taxable activity.
You may be able to claim some GST on the purchase and you may need to make ongoing adjustments.
Any claims for the purchase of the property itself or any capital improvements made to the dwelling may make a future sale of the property subject to GST on the full sale amount. An election can be made to treat principally private assets as non-taxable.
Progress payments, like periodic payments made under hire agreements, are treated as a series of separate supplies for each period of the agreement.
When is the time of supply?
The time of supply is the earlier of when a progress payment was made or when an invoice was provided.
The goods or services must be supplied in one of the following ways:
- progressively or periodically, and paid for in the same way
- directly in constructing, manufacturing or extending a building, or civil engineering work, with payments made periodically as the work progresses.
If you receive progress payments and you use the invoice or hybrid basis, account for the GST in the return for the period a payment is due or received or an invoice is issued, whichever is earlier.
For the payments basis, account for GST when you receive any payments.
Claiming a GST credit
If you are making progress payments under the invoice basis, you may claim a GST credit in any of the following situations.
In the earliest return period a payment is due. When you make a payment.
When you receive an invoice for the instalment.
For the payments and hybrid basis you claim a credit in the GST return period you make a payment in.
In hire purchase arrangements, goods may be repossessed and resold if a buyer does not keep up the payments. If there is a forced sale, the original buyer (not the repossessor) is considered to supply the goods to the new purchaser.
Accounting for GST
If the goods sold are used in a taxable activity, GST must be accounted for when they are sold after repossession.
To account for the GST, the repossessor will need to file a special Goods and services tax return for goods sold in satisfaction of debt - IR373.
Gordon sells a $1,380 fridge on hire purchase to Bridget for her restaurant. Gordon accounts for GST of $180 ($1,380 x 3 divided by 23) in the return covering the period the agreement was made in.
Bridget does not keep up the payments.
Gordon repossesses the fridge and sells it again. The sale is not included in Gordon’s GST return. Gordon must file a special return for goods sold in satisfaction of debt, which will include the sale of the fridge on Bridget’s behalf. If Gordon used an agent, Tim, to repossess the fridge, Bridget would still be making the sale and responsible for accounting for GST on it.
The agreement between Gordon (original vendor) and Tim (the agent) would determine who files the special return for the resale of the fridge.
Time of supply for road user charges is when any payment is made to the New Zealand Transport Agency or one of their agents.
You can only claim GST in the period when the payment is made.
The organisation is the registered person and not the individual members, if people are members of an unincorporated body, such as partnership, joint venture or trust.
If a member sells an interest in the organisation, there may be no GST implications if it is a private transaction between 2 persons and not a taxable supply.
Generally, the same rules for GST and record keeping apply to secondhand goods as for all other goods liable for GST.
What secondhand goods are
Secondhand goods are goods previously used by someone else. This includes land.
What secondhand goods are not
Secondhand goods are not:
- new goods
- primary produce (unless previously used)
- goods supplied under a lease or rental agreement
- goods consisting of any fine metal of any degree of purity.
Buying goods from a non-registered seller
If you are GST-registered you may be able to claim a credit for GST purposes when you buy secondhand goods. If the seller is not registered for GST or the goods are private (exempt), there is no GST charged.
Regardless of the accounting basis you use, you must make a payment before you can claim the credit for the purchase.
You must record:
- the name and address of the supplier
- the date of the purchase
- a description of the goods
- the quantity of the goods
- the price paid.
You'll also need to keep details of the transaction if you are going to make a claim for income tax purposes.
Exported secondhand goods
If you sell and export secondhand goods after you've claimed GST on the purchase, you can only zero-rate the sale if:
- the goods are entered for export
- the goods leave New Zealand within 28 days of the time of supply
- the recipient provides a declaration that the goods will not be reimported to New Zealand. This declaration may be included in the sale and purchase agreement for the goods.
If you make a supply of goods and services for more than $225,000 it must be accounted for using the invoice basis regardless of your accounting basis.
The general time of supply rule applies.
However, you can continue using your normal basis if the transaction is a 'short term agreement for the sale and purchase of property or services'. This means that settlement must take place, or services must be performed, within 365 days of the date the agreement is entered into.
Special rules apply if you make certain supplies to people closely associated with you such as relatives, or closely connected associated companies or trusts.
Supply to registered associated persons
If you supply goods or services to an associated person who can claim a GST credit for the purchase, you account for GST on the amount received.
Supply to unregistered associated persons
If you supply goods or services to an associated person who cannot claim a deduction, you must work out the open (current) market value of the supply and account for the greater of the market value, or the amount you charged, in your return.
Taxable period the supply falls in
Include transactions with associated persons in the return for the taxable period you made the supply in. However, if you receive payment or issue an invoice before the last date for filing that return, the date of payment or invoice determines which taxable period the supply falls in, depending on your accounting basis.
Claiming GST on associated supplies
For the invoice basis, claim a deduction in the return for the taxable period the supply is made available, removed or performed in. However, if you make payment or receive an invoice before the last date for filing that return, the date of payment or invoice determines the return period.If you use the payments or hybrid basis, claim the GST as you make payments as usual.
Jones and Jones, a GST-registered partnership sells a piano to Dawn, a sister of one of the partners. Dawn is registered for GST and can claim a GST credit on the purchase.
The open (current) market value of the piano is $2,000 but the sale is for $1,500. The partnership accounts for GST of $195.65 ($1,500 x 3 divided by 23).
If Dawn was not registered for GST, the partnership would account for GST of $260.87.
This is the $2,000 market value multiplied by 3 then divided by 23.
A partnership has a 2-month return period. The return for the period ended 30 April is due on the last working day of May.
The partnership supplies goods with an open (current) market value of $115 to a non-registered brother of one of the partners on 24 April and receives payment of $100 on 16 June. The partnership will account for $15 GST (on the market value of $115) in the return for the taxable period ended 30 April, as this is the period in which the supply was made.
If the partnership had issued an invoice or received payment during May (before the April return was due to be filed), the $15 GST would be included in the return period to 30 June. This is because the invoice or payment falls in the June return period.
Outbound mobile roaming services
Outbound mobile roaming services means mobile roaming services used outside New Zealand by a person with a New Zealand registered mobile device, whose usual mobile network is in New Zealand. These services are subject to GST of 15%.
Inbound mobile roaming services
Inbound mobile roaming services means mobile roaming services used by a non-resident who is in New Zealand and whose usual mobile network is outside New Zealand. These services are zero-rated for GST if supplied by a resident or treated as being made outside New Zealand (and so are not subject to GST) if supplied by a non-resident.
A registered person may invite tenders for a future supply of goods or services. The advertisement should state whether the tenders should include GST, so both parties know whether to allow for GST in the tender amount.
Occasionally the person making a tender will have to pay a deposit. There is no GST on the deposit unless all or part of it is kept for some reason.
Tokens, stamp and vouchers with no fixed value
The supplier should treat tokens, stamps and vouchers that have no fixed value as a supply for GST purposes at the time a customer buys them. This also applies to postage stamps and vouchers sold to a non-resident for services performed in New Zealand. The supplier must account for GST on these items when the customer buys them.
Tokens, stamps and vouchers with a fixed value
For tokens, stamps and vouchers with a fixed value, the supplier has a choice of when to account for GST. As it may be impractical to return the GST at the time when the customer buys a voucher, the supplier can return the GST when the customer exchanges the voucher for the monetary value of the goods or services purchased.
The supplier of the voucher and supplier of the goods or services need to agree to do this.
Claiming GST on tokens, stamps and vouchers
Buying tokens, stamps and vouchers can be claimed as an expense when they are acquired, according to your accounting basis.
A petrol station owner sells an oil company's $20 petrol voucher to a customer. The petrol station owner collects the $20 for the oil company, and forwards the money to the oil company.
The customer gives the voucher to a friend who buys petrol at another petrol station. Here, there is an agreement between the petrol stations to return the GST on redemption of the voucher. The second petrol station tells the oil company they have sold petrol (goods) in exchange for a $20 petrol voucher.
The oil company reimburses the second petrol station owner for the sale, who then accounts for the GST on the $20 by including the total amount of the sale in their GST return.