KEEPING UP WITH GST CHANGES

The latest tax legislation, introduced to Parliament on September 8, has only passed its first reading but once enacted, will have GST effects to be phased in over a couple of years.

The first is an amendment that corrects earlier legislation (effective 1/4/11) which made some residential accommodation subject to full GST on sale, even though only part of the property was used for business: eg, a farmhouse or residential property containing a business office.

Under the old rules, an adjustment was permitted on sale to claim previously unclaimed input tax but the net result was that GST was payable on 100 per cent of the profit on sale, which could be considerable if the property had been owned for some time.

The new legislation will enable affected taxpayers to notify IRD and adjust for any GST claimed on acquisition, on improvements or if the property was zero rated, to in effect wipe the necessity to account for GST on a future sale of the now exempt house.

The timeframe for this fix is between 1/4/23 and 1/4/25.

If property was sold between 1/4/11 and 31/8/22, there is no concession available.

For property sold 1/9/22 to 31/3/23, where principal purpose is not business, no GST been claimed on purchase (or if zero rated adjustment correctly made) and GST returned on sale, can amend return to exclude it.

Note that claims on overheads such as a part of utilities, minor maintenance etc. are now ignored as consideration is only given to the capital asset itself.

This is a very complex area, so even if you are not anticipating selling the property in the near future, get your adviser to ensure there is no long term potential exposure to GST which needs correction during the concession period.

The second amendment is to the tax invoice rules which are scheduled to take effect from 1/4/23.

The term “Tax Invoice” has been replaced with “Taxable Supply Information” (“TSI”). This is broader and can include invoices, contracts or other documents to support the transaction.

The low value threshold for reduced information requirements has increased from $50 to $200.

One important change is that the

sequestration. Foster said He Waka Eke Noa had proposed a carefully balanced system that took on-farm sequestration into account when calculating each farm’s levy bill.

She said the group proposed farmers would be able to “bank” the sequestration from a wide range of vegetation, including riparian planting alongside streams, woodlots and windbreaks as well as native forest.

“The Government’s proposing recognising a more limited range of vegetation, only a fraction of what is actually being sequestered on-farm,” Foster said.

“And it’s proposing rewarding farmers in the short term through contracts and in the long term through including this vegetation in the NZETS.

“We need to take time to understand the practical impact of these changes and work with the Government to ensure genuine sequestration is appropriately recognised,” she said.

Foster encouraged farmers to get involved by putting forward their views on what would help them transition to the lower-emissions food production that customers and the community were looking for.

People have until tomorrow to provide feedback on the Government’s proposal.

The Northland Age contacted the Ministry for Primary Industries, which said it was not able to comment.

Minister for Agriculture Damien O’Connor was also approached for comment, but did not respond in time for edition.