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February tax bill – what’s in store for you?

On 26th February, the Government introduced the long-awaited Taxation (Annual Rates for 2015-16, Research and Development and Remedial Matters) Bill. This post provides a brief overview of what tax changes are in the pipeline. Read more

GST and Body Corporates

Minister of Revenue Todd McClay has announced the Government’s intention to amend the GST Act to confirm that Body Corporates will not be required to register for GST and file returns.  The Government’s view is that this will align Body Corporates with the rules for other residential property owners.  For more information see http://taxpolicy.ird.govt.nz/news/2014-06-06-govt-seeks-feedback-proposals-clarify-gst-treatment-bodies-corporate#statement.

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Trustees liable to pay liquidators for company’s losses

This item has been adapted from an article written by Marilyn Hay

In the case of Rowmata Holdings Limited (in liq) v Hildred, the High Court has held that liquidators of a company were entitled to repayment of GST receipts from associated parties (two trusts) that had received them.

Background

The matter arose from a sale and purchase agreement for the purchase of land where two trusts (the purchasers) did not have the financial ability to settle. Before settlement date a company incorporated by the purchasers claimed a GST refund from the purchase some of which it paid out to the trusts in settlement of debts. When the purchasers subsequently defaulted at settlement date, the GST refund became repayable to Inland Revenue but there were no funds held by the company to meet this liability. The company went into liquidation and the High Court agreed with the liquidators that they were entitled to recover the entire amounts claimed from the trustees of the trusts.

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Trust income from property transactions liable for income tax and GST

This item has been adapted from an article written by Marilyn Hay

A recent Taxation Review Authority (TRA) decision has held that amounts derived by a trust that bought and sold properties were income on the basis that the properties were acquired for the purpose of intention of sale. The TRA also held that the trust was in the business of erecting buildings and that the exemption for residential land did not apply in this case. In addition, the TRA found that the trust was deemed to be registered for GST. The trust was therefore liable for income tax and GST output tax on the sales of the properties. The TRA also found that the trust was grossly careless when taking its tax position and that shortfall penalties should be imposed for gross carelessness.

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Inclusive or exclusive of GST?

GST, is simple tax that can nevertheless prove difficult in practice.  While compulsory zero-rating will assist in some regard, there will always be transactions where it is necessary to draft special clauses to deal with GST.  Sometimes the clause will reflect the parties’ intentions and everyone will be happy.  Sometimes it won’t.

From the writer’s experience the difference between the outcomes depends in large part on an appreciation as to how the GST liability is calculated and how this is to work in relation to the terms exclusive and inclusive of GST (or plus GST (if any)) as relevant.

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GST – the forgotten tax

Given the far reaching nature of goods and services tax, it is surprising how often the imposition or impact of GST is disregarded, forgotten or left subject to multiple interpretations. The recent case of Sayes v Tamatekapua [2012] NZCA 524 provides ample illustration of the cost and delay when GST is not expressly addressed. In fairness to the parties it is noted that the deed of settlement did provide for how any tax or gift duty was to be paid.

However, what was not expressly addressed was whether the value of property that would be transferred pursuant to a deed of settlement was to be valued on a GST-inclusive or GST-exclusive basis. The valuation mechanism was relevant as it would determine ultimate shares in the estate. The High court found that the current market value was determined on a GST-exclusive basis, a finding that was up-held by the Court of Appeal.

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Tricky transitional rules for GST Zero Rating of Land

The Finance and Expenditure Select Committee (“FEC”) recently reported back on the Taxation (GST and Remedial Matters) Bill.  This Bill contains significant amendments to the GST Act, perhaps the most significant since the changes made in the year 2000.  It is important to be aware of the provisions relating to the zero rating of land contained in the Bill.

This article focuses on some of the transitional issues that advisors should be aware of. Read more

GST rate increase – Is it worthwhile to pay council rates instalments in advance?

I recently received an invoice from the Wellington City Council for the first quarterly rates instalment for the 2010/2011 year. Enclosed with the invoice was a slip advising of the upcoming increase in GST rate and suggesting that ratepayers could save themselves some money by paying the remaining three rates instalments before 1 October if they can afford to do so. We thought it would be interesting to put this to the test with some back-of-the-envelope calculations. Read more

Budget Podcast – John Peterson, Vicki Ammundsen and Sybrand van Schalkwyk

John Peterson and Vicki Ammundsen join me on this first TalkTax podcast.  Hope you enjoy our thoughts on the Budget released today.  Please leave a comment below.

Click on this link to listen: Thoughts on the Budget

The transcript of the podcast is copied below:

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Boiler Plate GST Clauses

The NSW Supreme Court has recently handed down two decisions which consider when the contractual remedy of rectification for mistake is available in relation to GST clauses.

Both cases involved a sale of commercial/retail premises by auction where a dispute arose due to inconsistency between the written terms of the sale contract and the oral evidence regarding the intention of the parties as to whether the agreed price was GST inclusive or exclusive.  In both cases, the sale contracts contained no special conditions regarding GST so the standard GST provisions operated by default to make the price GST inclusive.

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Recent comments

  • Joanne Martin: Hi Would you be able to email me to discuss a small company that is an LTC which I need some advice on...
  • Rizwana Saheed: You are on the right track that there is an exemption when employees work overtime but whether or not...
  • bryan: as a group of employees we get paid meal money if we exceed 11hrs on any day. Employer says he wants to tax...
  • linda: My mother is 94 and has dementia. With govt assisted carers she is still living in a home gifted within the...
  • Sharon: Hi Daniel, Can you please advise how owners of a profit-making LTC pay themselves? The owners used to pay...
  • Another Anne: My Dad is in care on full subsidy. I am EPOA. Are we able to gift some money to my brother in UK so...
  • Twagilayesu Isaya: I agree with the author of this article that Inland Revenue Department need to provide clear...
  • Quinn: Hi. I would like some clarification regarding the valuation of the investments component of the owners basis...
  • QROPS Pensions: Interesting piece of writing, you always write the most useful content & TalkTax is no exception...
  • Davo: Jo, quite likely is that the transition to an LTC was not done in time and the company became a normal company...

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