New Zealand GST Calculator Blog

Wednesday 07 June 2017

Consumers are avoiding paying $235m a year in GST by buying goods from overseas websites

Consumers are avoiding paying $235m a year in GST by buying goods from overseas websites and that figure will grow to $935m in 10 years if the "loophole" isn't closed, Retail NZ says.

Retail NZ policy manager Greg Harford said its estimate didn't take into account the possibility that shipments by Amazon to New Zealand consumers could increase once Amazon sets up distribution centres in Australia within the coming year.

Amazon shares climbed above US$1000 (NZ$1400) for the first time this week, having risen by more than a third over the past year.

The Australian government had planned to require foreign companies to levy GST on internet shopping purchases from July, but its senate has recommended delaying that by a year amid concerns the original deadline is impractical.  

Story from stuff.co.nz

Monday 21 November 2016

John Key reveals plans for TAX cuts in New Zealand

The Kaikoura earthquakes have not demolished the Government's tax cut plans but they may force Treasury to delay its half-year update while it crunches the numbers, Prime Minister John Key said.

Speaking to reporters in Peru, where he is attending the Apec Summit, he also revealed the Government is preparing a "tax and family" package for the 2017 campaign and beyond.

ANZ economists have warned the cost of the earthquake could make the mooted tax cuts for 2017 unlikely, with less room for an election year "lolly scramble".

Key said the earthquakes were a factor that could have some impact on the Government's plans "and we can't say that wouldn't".

Story from stuff.co.nz

Wednesday 14 October 2015

Records $414 million surplus for New Zealand Government

SA higher than expected tax take has boosted the Government's books on the way to a $414 million surplus - the first since it came to power in 2008 and a significant political victory for Finance Minister Bill English.

However, English has refused to commit the Government to achieving surpluses in the coming years, while he also said there would be a high hurdle in place for bringing forward planned tax cuts.

But the official confirmation comes months after English had played down the Government's goal that it would come into surplus by 2014/15, instead predicting a small deficit.

Instead, it has recorded a $414m surplus for the last financial year, 0.2 per cent of GDP, and an operating balance surplus of $5.8 billion.

The Treasury's financial statements said the Government's books had been boosted by a $5.1b increase in core Crown tax revenue, higher than an expected and an $8.2 per cent increase compared to the previous year.

"Robust growth" in the construction, household consumption and tourism sectors had largely underpinned the increase in tax revenue, while core Crown expenses had remained relatively flat, increasing only $1.2b.

Core Crown debt had increased by $700m, but fallen as an overall percentage of GDP.

The core Crown revenue for 2014/15 was $72.2b, with core expenses of $72.4b.

English said the surplus was a vindication of the Government's efforts to improve productivity and improve the quality of public services.

While returning to surplus was a "significant milestone", English said the Government would continue to focus on "prudent management" of the economy and tackling debt levels.

"Our focus must remain on steady and ongoing reductions in public debt over the medium term. That is the most prudent approach to take in a still uncertain global environment."

Story from stuff.co.nz

Monday 28 September 2015

The force is strong in New Zealand - but not strong enough for a tax break.

Star Wars Jedi not religious enough for a tax break in New Zealand, says Department of Internal Affairs.

The Department of Internal Affairs has rejected a request by the Jedi Society Incorporated to be recognised as a legitimate charitable endeavour, with all the tax-free benefits that entails.

The society was established in April 2014, with an aim of acting as "guardians of peace" and keeping a particular eye on agents of the dark side of the force.

As well as protecting the galaxy, the society said it would promote the Jedi religion, build a temple and try to grow the number of Jedi adherents in New Zealand.

But these lofty goals did not meet the threshold needed to be officially considered a charity.

In a decision earlier this month, the department's charity services board found that the society did not "advance religion" or "promote a moral or spiritual improvement".

Specifically, Jediism was not consider "structured, cogent or serious" enough to count as a religious organisation and therefore was not eligible for tax-emptied charitable status, the board said.

Anthony Bremner, of the New Zealand Jedi Society's Jedi Council, said the society would take the board's comments into account, make some changes and re-apply for charitable status.

"Not achieving charity status would be disappointing to those without Jedi training. Disappointment is not a Jedi trait," he said.

Jediism is based on the Star Wars films, a science-fiction series that centres around a galactic struggles between the light and dark sides of the force.

In the films, lightsaber-wielding Jedi knights use the light side of the "the force", a binding universal power that gives them special powers.

Jediism as a real world phenomenon gained traction in 2001 after a campaign in the United Kingdom and Australia urging people to declare themselves "Jedi" in the census.

In the 2011 New Zealand census, nearly 19,089 Kiwis declared themselves adherents of the Jedi religion.

However, the census does not recognise Jediism, marking all of these responses as "not legitimate". This was despite the self-professed Jedi outnumbering many officially recognised religions, including the Church Of Scientology, which had only 315 devotees in the country.

In 2010, Auckland man Craig Thomas even ran for council on a "Jedi platform" and Jedi weddings are also available in New Zealand.

The Jedi church website states that the basic religious tenets are a belief in the force, which binds the universe together, and doing what was "innately" good.

Adherents are urged to "listen to the force and beware of the dark side".

Self-professed Wellington Jedi Renee Lee said with the new Star Wars films, the first released to cinemas in December, on their way it was only a matter of time before Jediism's popularity become too big to ignore.

"There is a whole young generation that are going to learn about the force," she said.

"I do think charities service should give these guys a chance."

And while the Jedi Society did not make the cut as a charity this time, the board has left the door open for another attempt.

It considered that one day "Jediism may develop the level of seriousness and structure necessary to advance religion".

Story from stuff.co.nz

Tuesday 17 March 2015

Netflix says it won’t charge GST

Sparks are flying after Netflix said it would not charge GST on the New Zealand version of its online tv service which launches on the 26th March.

Andrew Pirie, spokesman for Spark, which owns rival internet tv service Lightbox, said it was "yet another example of the lack of a level-playing field in this rapidly changing digital world".

"Lightbox has been set up as a NZ based company, working under NZ rules and paying NZ tax and we think other companies should be doing the same," he said.

The argument over whether GST should be charged on digital imports, such as online television, music and games services that are hosted overseas, flared up last week when Revenue Minister Todd McClay instructed officials to look at the steps other countries were starting to take to collect such taxes.

The tax status of Netflix' local service versus Lightbox and Sky's Neon service looks set to highlight what is at stake.

USA based Netflix, Sky TV and Spark are locked in a bidding battle to secure the best programmes for their streaming televisions services and to win over consumers in what is expected to become a fiercely competitive market.

But Netflix will have a 15 per cent cost-advantage over Lightbox and Neon because it will not have to charge viewers GST.

A company spokesman said Netflix would not collect GST in either NZ or Australia, where it is also launching a local service, as it was "not a local entity".

"There have been discussions in both countries about changing the law on this to collect even from non-local entities, however that's something to look at in the future," he said.

Netflix has registered a subsidiary in New Zealand that is owned by another Netflix company in Holland, but Victoria University professor John Shewan said that would not necessarily be enough to make the company's localised television service liable for GST if the service was delivered from overseas.

But Spark could not avoid GST on Lightbox by moving it overseas, because of its base here, he said.

IRD said it could not comment. Legislation prevents it from commenting on the tax affairs of individual companies, a spokesman said.

McClay announced on Friday he had asked officials to report back to him soon on the measures other countries were taking to collect taxes on digital imports such as internet television, saying they appeared to be effective.

South Africa became the first country to "go it alone" in June, when it required overseas firms to register for GST on electronic services they supplied to South African customers.

But Prime Minister John Key said that all countries would eventually need to deal with the loss of tax that was resulting from online purchases and stressed the importance of work the Organisation for Economic Cooperation and Development was doing in finding a solution. "It looks a lot easier if you can move as part of an international approach," he said.

Key acknowledged that closing any tax loophole might not be popular with consumers. "[But] most people are realistic enough to say a lot of jobs are supported by retailing in New Zealand and we just want people to be on a level playing field," he said.

PWC tax partner Eugen Trombitas said McClay was moving in parallel with Australia which was also looking at the issue.

If New Zealand was to charge GST on imported digital services it would need to persuade overseas suppliers to register for GST and then pay the tax on consumers' behalf, he said.

Although it would be hard to apply sanctions on overseas companies that did not register, the South African experience suggested multinationals would play ball, he said.

"The registration of foreign sellers is easy and works well. About 80 to 100 foreign sellers have registered. All the 'big ones' are in."

Collecting GST on the international flow of bits and bytes might be easier than collecting GST on physical goods, which usually fall under the GST net if they cost less than $400.00 to buy and import, Trombitas said.

Although a similar registration system could be set up for overseas web businesses that shipped low-value physical products to NZ, it could be hard for consumers and Customs to know whether tax had been paid when goods passed across the border, he said. "You could end up in a double-tax situation."

Story from stuff.co.nz

Friday 13 March 2015

Online shoppers could soon be paying GST on more internet purchases.

At present, GST is not charged on imported digital products such as music, films and games that are downloaded or streamed from overseas and cloud software services that are hosted abroad. 

Physical goods bought online worth less than $400.00 also generally escaped GST because the combined value of the tax and duty payable was less than $60.00.

Revenue Minister Todd McClay has  asked officials to look at the measures other countries were taking to collect GST-type taxes, saying they appeared to be increasing the amount of tax collected.

Spokesman Greg Harford said the $60 tax threshold meant New Zealand retailers could not compete with foreign websites. The association has also estimated it is costing the Government $200 million to $300 million in lost revenue.  

South Africa became the first country to try to charge GST on digital imports in June, when it required overseas firms to register for GST on electronic services they supplied to South African customers.

Speaking at the Institute of Financial Advisers annual conference in Queenstown, McClay appeared to give a nod to domestic retailers, saying it was important GST was fair to "consumers, retailers, and all taxpayers". 

"Where tax is not paid by one group, it must be made up for by another," he said.

A number of countries had implemented policies to tackle "offshore purchasing" and digital downloads, he said.

"Early indications are that these measures are having their desired effect. I have therefore instructed officials to report to me in the short term on these developments and their suitability for implementing as part of the New Zealand tax system."

However, McClay also said the Organisation for Economic Co-operation and Development (OECD) appeared to be making good progress developing international rules that would help countries plug gaps in the collection of GST.

A spokeswoman for McClay indicated the speech did not necessarily signal the Government was shifting its emphasis away from the OECD international approach. 

"In terms of significance, you should read out of the speech that we remain committed to the OECD process. While actively looking at other jurisdictions' successes, we need to be mindful their methods may, or may not suit New Zealand," she said.

Officials had not been given a deadline for their report, she said.

The Government set up a joint working party between Inland Revenue and Customs in 2013 to look at the tax-free threshold and had planned to release a discussion paper last year, in the run up to the election, that would have given retailers and consumers an opportunity to have their say. But it delayed the paper until this year, citing international developments. 

McClay indicated at the time that the Government believed the tax treatment of digital products and services was at least as big an issue. Their value is increasing because of technological change and the increased uptake of fast broadband.

Story from stuff.co.nz

Thursday 26 February 2015

Bodies corporate will no longer be required to register for GST

Following the introduction today of the Taxation Bill, Revenue Minister Todd McClay says.

Included in the omnibus tax bill are a number of proposed measures to clarify the GST position of bodies corporate, following on from consultation on the issue last year.

“We have in New Zealand a well-recognised process for developing new tax rules, which involves extensive consultation with the taxpayer community before final decisions are made by the Government,” says Mr McClay.

“As I signalled last year, requiring bodies corporate to be GST registered would have placed excessive administration costs on them. The feedback we received confirmed that position and so this bill now gives the 13,800 bodies corporate, and the owners of 135,000 units, the choice.”

The proposed changes in the bill respond to the issues raised by the Government discussion document, GST treatment of bodies corporate, which outlined proposed rules to deal with uncertainty around whether bodies corporate should be required to register for GST.

Revised rules have been included in the tax bill that will give assurance to bodies corporate that their past GST positions are correct, and give them the option to register for GST in future, but will not require them to do so.

“Under the approach proposed in the Bill, registered bodies corporate are able to remain registered, and those that are not registered are not required to do so, but may. This means the majority of bodies corporate will not have to take any action at all, which will be welcomed by residential and commercial bodies corporate alike.

“Submitters were also concerned about the compliance costs of the original proposal and, as a result, the new measures proposed in the bill are simple to apply and targeted at keeping compliance costs to a minimum.” says Mr McClay.

Special rules have also been included to ensure that GST is neutral for bodies corporate that decide to register, as well as ensuring that output tax is not payable on common property held by a body corporate if it decides to deregister.

Story from scoop.co.nz

Wednesday 19th November

Tax Credits or GST Off Food And Rates?

GST Off Food And Rates Better for Families than Tax Credit Rise

New Zealand First’s policy of removing GST from food and rates would do more for struggling families than a slight rise to the family tax credit, says New Zealand First.

“Minor increases to the family tax credit will do nothing to make life easier for struggling families,” says Revenue Spokesperson Fletcher Tabuteau.

“Families need GST off food and rates more than a tax credit tweak.

“This is fully fundable by cracking down on the estimated $7 billion worth of tax avoidance.

“New Zealand First believes in supporting hardworking Kiwi families and our targeted tax package gives families exactly what they need rather than turning them into beneficiaries.

“Such a small increase does not address the bigger issue of low wages for New Zealanders.

“We commend the Minister’s efforts to keep the minimum family tax credit in line with inflation, but we seriously question whether an after-tax income increase of $260 per year or $5 a week will make any difference at all.

“The Government must do more to ease financial pressures on New Zealanders and New Zealand First would be delighted to sit down with the Government to agree on an action plan.

“So far they are demonstrating a complete lack of understanding around the very real financial challenges Kiwis are facing,” says Mr Tabuteau.

Story from scoop.co.nz

Friday 3rd October

Election 2014 - GST/Taxing issue of overseas purchases

As part of the Northern Advocate’s election coverage, we’ve quizzed the candidates on some of the issues that are important to Northlanders. The questions have come from readers and the Advocate. Here is the latest question asked and the responses from the Northland electorate candidates who submitted their responses within the deadline given.

We asked: As a retailer I would really like to know what the parties are going to do about the overseas online purchases that are killing our shops, mainly the GST issue where overseas purchases under $400 are not liable for GST thus the temptation for people to purchase from other countries instantly saves them 15 per cent. Many candidates talk about our dying high streets and empty shops, what are they going to do about it?

David Clendon, Green Party:

The current GST exemption diverts domestic spending offshore, lowering tax revenues from GST, company and PAYE tax and distorts consumer choices. We support a review on whether GST can be levied on international purchases worth less than $400 to be fairer to local retailers. The Green Party would likely follow any new recommendation made by a reconvened expert review group in threshold levels.

We will also make New Zealand more competitive through investing in research and development so that we have home-grown industries that can become more competitive in New Zealand and worldwide.

Ken Rintoul | Focus NZ:

A paper by the NZ Institute for the Study of Competition and Regulation has shown one of the key drivers of e-commerce is lower online prices. It states foreign retailers have an implicit 15 per cent price advantage over comparable domestic retailers. It also states there is anecdotal evidence of illegally devaluing purchase amounts to enable GST and duties to be evaded.

Focus NZ agrees with all the NZ Institute's findings and views the Government's current tax policy as distortionary, negatively affecting government revenue and domestic retailers. We also recognise the significant flow-on impacts on our economy of having smaller retail businesses closing. It's much more than just a loss of taxable income from GST.

Other impacts on government are: tax losses from reduced NZ retail company profit and reduced economic activity; reduced PAYE tax; loss of GST on operational costs associated with bricks and mortar retail outlets; loss of retail jobs, and if not picked up by employment increases in other industries, there's extra cost to government through unemployment benefit payments, and resultant social costs on both government and communities.

The main argument against dropping the $400 minimum threshold is the enforcement cost due to manual inspection of all packages entering the country.

Focus NZ will seek to implement GST on all overseas purchases of goods and services. We are committed to creating a level playing field for New Zealand companies, committed to reducing their compliance costs, and committed to making their businesses more profitable.

Mike Sabin | National Party:

I'm sympathetic to the fact that retailers are often competing with offshore websites that don't account for GST but it's important that any solution is workable and does not create a major hassle for consumers. The issue is not unique to New Zealand and other countries are struggling to come up with practical solutions.

There are also a range of related issues such as the taxation of online businesses more generally. Accordingly, the Government is looking at the issue in the wider context of the digital economy and is keeping a close eye on international developments which may provide solutions moving forward.

Supporting growth in New Zealand's economy which helps drive greater purchase power and sales while increasing loyalty by New Zealand consumers to buy local and support local commerce is one practical approach we can all be involved in and take, despite the challenges of online sales.

David Wilson | Democrats for Social Credit:

Retailers in small places like Paparoa and Kawakawa are being hit even harder as people either use the internet or travel to Whangarei where their choice is larger and the "big box" retailers are.

But retailers could be significantly helped by our policy of eliminating GST totally (not just on fruit and vegetables). This means the advantage that customers have from using the internet to buy overseas would disappear.

We would replace GST with a Transactions Tax at just 10c per $100 on withdrawals from all bank accounts. Compare that to GST at $15 per $100. That means purchases from overseas or locally would all attract the same tax.

The transactions tax would catch in the tax net, the massive top end market in financial speculation, currency trading and the like, which is currently untouched by the GST regime. Given that New Zealand is the 9th most traded currency in the world, the amount collected from a transactions tax that includes currency trading would be more than the entire GST tax take. Banks already withdraw their own account fees through an automated function of account management. It will be very simple for the banking system to implement transactions tax, and very difficult to avoid payment. Retailers would be saved the cost of administering GST and filing returns.

Article from nzherald



Sunday 20th July

NZ First has announced a plan to remove GST from food

fresh food - remove GST from food NZ First has announced a plan to remove GST from food, as part of several policies announced at its party conference.

Winston Peters also said the party wanted GST removed from rates on residential property calling it a tax on tax deceit.

"This bold policy aims at the heart of the inequality undermining our society," Winston said.

Labour had a policy of removing GST from vegetables and fresh fruit going into the 2011 election but it has since been dropped by the party. Last week Winston Peters accused the Conservative Party of plagiarism because it believed the party was lifting its policies.

Winston Peters said the policy was estimated to cost $3 billion a year, and would be funded by a clamp down on "tax evasion and the black economy", which it estimated to cost $7 billion a year, and what Winston Peters said was "drawing on the projected surplus of billions in the years ahead that result from running a sound economy".

Winston Peters also announced a new policy to tackle drug taking and binge drinking.

"We propose, to the degree that it could cause serious harm to themselves, or someone else, it will be an offence to be drunk or seriously drug affected in a public place, or while trespassing on private property," with offenders paying fines of up to $2000 or three months in prison.

Article from Stuff



Thursday 3rd July

New Zealand Landlords say low taxes cap rents

land lords taxesNearly $500 million in tax was paid on rental incomes in the financial year ended March 2013 in New Zealand, figures obtained under the Official Information Act show.

The New Zealand Property Investors Federation (NZPIF) requested the information in response to the Tax Working Group's finding in 2009 that rental property owners took money out of the tax system rather than paying into it.

It found that rental property owners last year collected about $1.5 billion in revenue, of which about $500m went to Inland Revenue in tax.

The federation said "only Inland Revenue data from 2008 was used to back their claim" - a year in which high interest rates saw most property owners lose money.

The federation said that based on the Tax Working Group's claims, the Government withdrew the ability of rental property owners to claim depreciation.

This had increased the cost of providing rental homes to tenants by $700m a year, or $33.65 a week per rental property.

NZPIF executive officer Andrew King said the new information "completely debunked" the idea that landlords did not pay tax.

He said the data showed that in the past 33 years there were only two years in which rental property owners did not pay tax on rental income. This was in 2007 and 2008, when mortgage interest rates were high.

Full article from Stuff



Monday 10th March

Inclusive of GST or Plus GST?

Inclusive of GST or Plus GSTGST has been with us since 1986 and, on most accounts, is a relatively straightforward tax.

However, it does contain several traps for people, which can be costly, especially regarding GST and land transactions.

In an article I wrote in June, I referred to the golden rule of GST for vendors, and that is to make contracts for the sale of land "plus GST (if any)".

However, I am still seeing contracts where the words "plus GST (if any)" are crossed out and the contract is signed as "inclusive of GST". This may be fine if both parties are not registered for GST, and clearly not liable to be registered for GST, and the transaction is the sale and purchase of a private dwelling.

However, I see contracts for dwellings sold on the basis that they are not subject to GST, when they may well be.

Residential rental properties that are in a GST-registered taxable activity or used for short-term accommodation are two examples.

In writing this, I am reminded of a case that involved a property in Queenstown sold on a GST-inclusive basis.

The property had been owned by the vendor for several years and had been used for both private purposes and short-term accommodation. The purchaser of the property intended using the property as a bed and breakfast establishment and had registered for GST.

Before settlement, the Inland Revenue Department challenged the GST registration status of the vendor, and moved to force registration of the vendor. The implication for the vendor was that they would have been required to account for the GST on the sale, and would not have been able to pass on the GST cost.

By - Craig Macalister is tax principal at accounting firm Crowe Horwath.

Full article from Stuff


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