An update on GST, Disclosures and more for Indian Newslink readers
Saurav Wadhwa
Auckland, March 17, 2023
As we approach the beginning of the new financial year, the Internal Revenue Department (IRD) has proposed many changes that will be implemented in April 2023.
While there are no major tax overhauls, these changes still have the potential to affect many taxpayers and businesses alike.
Our team at IBBZ have researched and analysed the amendments to provide you with the key updates you need to know to stay on top of your tax requirements.
Easier GST deductibility for Small Businesses
The first and arguably the most substantive amendment is a change to the GST apportionment rules. The Act will now allow a full deduction for goods/services acquired for $10,000 or less and with the principal purpose of making taxable supplies. The principal purpose is the main, primary, or fundamental purpose, it does not always equate with more than 50% taxable use. The proposed changes to GST apportionment and adjustment rules would reduce compliance costs imposed on businesses and promote fairness.
When goods/services are not acquired with the primary purpose of making taxable supplies, the registered person will be unable to claim an input tax deduction or apportion input tax over the taxable and non-taxable period.
When the goods/services acquired are acquired for more than $10,000 then the registered person will continue to use apportionment based on their estimated percentage use for making taxable supplies and adjustments being made at the end of each year.
This exemption is limited to goods as it is meant to apply to tangible assets such as land, building and vehicles. This is because these tangibles are likely to have a minor amount of use in making taxable supplies as opposed to intangibles such as intellectual property which are likely to have exclusive or mainly taxable use when acquired.
Ease on Disclosure Requirements for Small Trusts
The criteria which determine whether a trust is non-Active have changed.
Non-Active trusts are now no longer required to file returns or comply with trust disclosure rules.
A trust is non-Active for the 2021-2022 tax year if (1) Reportable Income was under $1000 (2) There have been no deductions (3) There have been no transactions which involve giving income to someone (3) There are no transactions that provide a benefit which is subject to FBT to a current or former employee.
If a trust is eligible to be non-Active, there are three filing options:
File a return and supply limited disclosure information: Under this option, a return is filed, and, in the return, it should be selected that the trust is not required to comply with the trust disclosure rules. Along with this, the variation recording spreadsheet, provided by IRD, should be completed and details of any person who has made a settlement on the trust disclosed. No further Action is required.
Complete the spreadsheet provided by IRD and not file a return: Under this option, a return is not filed to IRD and instead the variation recording spreadsheet, provided by IRD, is completed. Under option 2, a non-Active trust declaration will need to be completed before 30 June 2023.
File a return along with full disclosure information: Under this option, a return will be filed as usual.
GST Rules for Online Marketplace Providers (Airbnb, Uber and others)
With the rise in online marketplace operators, the GST rules have been amended to capture the providers of these online marketplaces. The operator of the marketplace (Airbnb, Uber) will be treated as the supplier of the listed services and therefore be liable for GST.
The underlying supplier will not be liable for GST as they do not usually have a large commercial operation providing accommodation.
Suppliers registered for GST will continue to be able to recover GST on their costs by claiming a deduction for input tax in their GST return as normal.
Under the proposed amendments, the underlying supplier will (1) No longer need to account for GST on supplies of listed services sold through electronic marketplaces. This will be the marketplace operator’s responsibility (2) Be treated as making supplies of listed services to the marketplace operator which are zero-rated (3) Include these zero-rated supplies in their GST return provided to IRD (4) Be able to claim input tax deductions on the costs they incur in making supplies of listed services through electronic marketplaces.
Marketplace operators will be required to collect GST on behalf of the underlying suppliers regardless of their GST status.
Public Transport FBT Exemption
Employers will now be able to support employee travel via public transport to and from work without being liable for Fringe Benefits Tax.
The following methods of travel will be exempt from FBT: Bus, Train, Ferry, Cable Car, and Tram.
Travel by airfare or taxi is not eligible for the FBT exemption.
This initiative is being put into effect to create incentives for the use of public transport.
It is a part of the government’s push to promote low-emissions travel. The removal of the FBT eliminates a compliance cost making it more cost-effective for employers to provide public transport passes and fares as employment perks.
New Invoicing Rules and Terminology
The new GST invoicing rules will allow greater flexibility and easier record-keeping.
Invoices compliant with the current rules will also be compliant with the new rules. The new terminology is being introduced.
The new terms will include (a) Taxable supply info instead of tax invoice (b) Supply correction Info instead of Debit/Credit note (c) Buyer created taxable supply info instead of buyer-created tax invoice
For taxable supply Information, a minimum set of information must be kept by buyers and sellers as evidence of a transaction. The new rules will also mean that the required information can be held in other forms such as bank statements, contracts and supplier agreements.
The information required is dependent on the value and type of supply.
From 1 April 2023, the thresholds are (1) $200 or less (2) Between $200 and $1000 (3) More than $1000.
As the value of the supply increases, the taxable supply information required will also increase. If you cannot meet the usual requirements for taxable supply of information, you can apply to IRD for approval to provide other information instead.
For further detail or clarification on the issues above or any other tax-related concerns visit our website ibbz.co.nz or contact our team. We would love to help you.
Saurav Wadhwa is a Chartered Accountant by qualification. He is the Principal Accountant at IBBZ Accounting Limited, Chartered Accountant & Tax Specialist, located in Botany, East Auckland.
