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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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GST-offsets – a lesson why not to

The recent decision in Spicer v Boulcott Development Group Limited HC Wellington CIV-2011-485-714, 24 August 2011 highlights the dangers inherent in GST-offset agreements. Although these agreements will be less common with the amendment to the GST Act allowing zero-rating of land there are still occasions where GST-offset agreements may be contemplated.

The facts of Spicer v Boulcott Development Group Limited are simply that following a taxable supply of land the vendor’s GST liability was to be met through an off-set agreement with the purchaser that was conditionally approved by the Commissioner of Inland Revenue.

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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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Healthy Food

The Goods and Services Tax (Exemption of Healthy Food) Amendment Bill (a private Member’s Bill sponsored by Rahui Katene) was pulled from the ballot last week. This Bill proposes to exempt “healthy foods” from GST so that these foods will be more affordable to low-income households. While the motivation for this is laudable, the question that needs to be asked is whether the cost of exempting a relatively narrow range of food groups would place a disproportionate burden on retailers. If this Bill is passed, the doors will be open to questions such as that recently decided in Lansell House Pty Ltd v FCT where the Federal Court of Australia held that the supply of a mini ciabatte (bread) that snaps like a cracker was a taxable supply of a cracker and not a GST-free supply of bread.

See Lansell House Pty Ltd v FCT [2010] FCA 329, Federal Court, Sundberg J, 9 April 2010.

The Contract Pacific Decision – a blank cheque for the IRD?

Has the Court of Appeal decision in C of IR v Control Pacific Limited [2009] NZCA 568 given the Commissioner of Inland Revenue a blank cheque to…well…close the cheque book?

At stake was whether the Commissioner was bound to pay Contract Pacific Ltd a GST refund totalling $6,669,061.74 because he had not complied with section 46 of the Goods and Services Tax Act 1985 which sets out the circumstances in which the Commissioner may withhold a GST refund.

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A fair rate of GST

It seems accepted in many quarters now that an increase to the rate of GST is inevitable.  If this is the case the figure of 15% appears to be a likely contender for the new rate – even if the math will be hard.  I’ve already stated my consumption tax bias, and as an avid home gardener, am currently collecting heirloom seeds for my next home grown home consumed zero-rated crop.

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Where should tax come from?

Tax is topical right now.  The Tax Working Group reports have made headline news around the country.  Should a new land tax be introduced? Should GST be increased?  Is it time for a comprehensive CGT?

Whether we like a tax, however it is imposed, is largely irrelevant.  If a tax is imposed we’re stuck with it.  That said, it is generally accepted that a “good” tax is one that is seen to be fair (so that less effort goes into evasion) and one that is not so expensive to administer that it contributes little to the tax base.

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Recent comments

  • Peter: When you have more than one job all your income is added up and you pay tax on the total income amount. For...
  • 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...

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