Tuesday 14th August 2018
|Text too small?|
The government is moving to close a GST loophole that could have created a “significant but unquantified” risk to the Crown’s revenue.
A supplementary order paper introduced today clarifies the rules on GST and will prevent non-profit groups from avoiding GST on income from asset sales, Revenue Minister Stuart Nash says.
The change was signalled in a May 15 issues paper and will be effective from that date. It stems from a new interpretation by Inland Revenue’s Office of the Chief Tax Counsel as to what constitutes the taxable activities of a not-for-profit organisation. That interpretation, endorsed by Crown Law, was that if an organisation sold an asset that did not form part of its taxable activities, the sale would not be subject to GST.
“The new interpretation is not consistent with the way the GST rules have been applied and understood in the past,” Nash said in a statement.
“If GST expenses have been claimed by a non-profit body in relation to an asset, GST should apply to the asset when it is sold or there is an equivalent event, such as an insurance pay-out.
“The tax system is based on fairness, and being simple and efficient to operate. The new interpretation threatens those principles and the law change restores certainty.”
The change will be effected through the Taxation (Annual Rates, Modernising Tax Administration, and Remedial Matters) Bill currently making its way through Parliament.
The supplementary order paper will also extend depreciation roll-over relief for Canterbury firms affected by earthquakes.
Nash said he had been advised at least 40 firms would be adversely affected if the current depreciation rules were not extended out to 2023-24 income year.
“The tax issue arises because an insurance payout on a depreciable asset can attract a tax liability which may cause consequent cash flow problems. We do not want to hinder the city’s recovery or unfairly burden these taxpayers,” he said.
No comments yet
MARKET CLOSE: NZ shares fall as investor uncertainty weighs on exporters; F&P Health, A2 drop
NZ dollar drops below US68c on plan to up bank capital
Noel Leeming fined $200,000 for misleading consumers
Big four banks face stiffer capital requirements from RBNZ
Infratil signals A$50m investment in Canberra Data Centres
Govt provides $2.5 mln to develop Opotiki aquaculture
Labour co-ordinator role may alleviate kiwifruit labour shortage
NZ manufacturing activity chugs along in November
Australia's GWA lobs in $118M bid for Methven
Govt leaves door open for higher emissions price cap