Goods and Services Tax (New Zealand) - Taxation in New Zealand is collected at a national level by the Inland Revenue Department (IRD) on behalf of the Government of New Zealand. National taxes are levied on personal and business income, as well as on the supply of goods and services.
Taxation in
New Zealand is collected at a national level by the Inland Revenue Department
(IRD) on behalf of the Government of New Zealand. National taxes are levied on
personal and business income, as well as on the supply of goods and services.
Goods and
services tax (GST) is an indirect tax introduced in New Zealand on October 1,
1986 at 10%, and later increased to 12.5% on July 1, 1989, and is to be
increased to 15% on October 1, 2010. This brought a major change in New Zealand
taxation policy as until this point almost all revenue had been raised through
direct taxes. Now 19% of the New Zealand Government's core revenue comes from
GST.
Most
products or services sold in New Zealand incur GST at a rate of 12.5%. End-users
pay this tax on all liable goods and services directly, in that the purchase
price of goods and services includes GST.
All
businesses are required to register for GST once their turnover exceeds (or is
likely to exceed) $60,000 per annum.
Registration for GST is required if you carry
out a taxable activity and if your turnover:
·
was over $60,000 for the last 12
months, or
·
is expected to go over $60,000 for
the next 12 months. In other words, if your turnover is $5,000 per month and
you expect to maintain that level all year, you'll need to register for GST.,
or
·
Was less than $60,000, but you
include GST in your prices, e.g taxi drivers who have included 12.5% in their
taxi fares.
You can even choose to register for
GST if your annual turnover is less than $60,000, which is known as voluntary
registration.
Procedure of GST working in New
Zealand :
Charge GST in sales and income and
claim it back for purchases and expenses. During the GST return,
calculate the difference to find out or work out whether to make a GST
payment or have to receive a GST refund. The working consists of the
following two points:
·
Charge GST @12.5% for sales and
income. Calculate GST by dividing the sales and the income figure by 9.
·
Similarly claim GST @12.5% for
purchases and expenses. Calculate GST by dividing the purchases and expenses
figure by 9.
Taxable
goods and services includes:
·
Goods include all types of personal
and real property, except money.
·
Services covers everything other
than goods or money, e.g. TV repairs, doctor's services and gardening services
Taxable
goods and services don't include:
·
goods and services supplied by
businesses that aren't registered for GST, and
·
exempt supplies such as:
o
rent from Domestic Accommodation.
o
interest you receive
o
donated goods and services sold by a
non-profit body, and
o
certain financial services.
GST-registered
organizations only pay GST on the difference between what they sell and what
they buy: income less expenditure. This is accomplished by reconciling GST
received through sales and GST paid (through purchases) at regular periods
typically every 2 months .However some qualifying companies may also opt for 1
month or 6 month periods. The difference is then paid to
Inland Revenue
Department (IRD) if the GST collected on sales is higher, or receiving a
refund from IRD if the GST paid on purchases is higher
Businesses
exporting goods and services from New Zealand are entitled to charge GST at
zero percent. This permits the business to claim back the input GST .However,
businesses that produce GST-exempt supplies are not able to claim back input
GST as non-New Zealand based consumer does not pay the tax.
The
GST inclusive price is usually irrelevant for business purchasing decisions
because businesses claim back their input GST. They mainly takes into
consideration the
cash flow issues. Consequently, wholesalers often
state prices exclusive of GST, but must collect the full, GST-inclusive price
when they make the sale and account to the IRD for the GST so collected.
The headline
price must always be
GST-inclusive in advertising and stores. The only
exceptions are for businesses which claim a mainly wholesale client-base.
Otherwise, displaying a prominent GST-exclusive price (i.e. larger and more
obvious than the GST-inclusive price), is illegal.
Recently,
GST increased to
15% in May 2010 budget which is going to be implemented
from Oct
1, 2010. As a result, businesses will need to make
many critical decisions about issues such as pricing points, updating business
systems, GST stipulations in long-term contracts, logistics around repricing
consumer goods, and updating promotional material. This new rate will also
create challenge for
tourism operators who have set their prices up to
2012.
The most immediate concern
for the majority of SMEs, particularly those selling goods and services
directly to consumers, will how much to increase
prices. Hence all
the businesses including SMEs in New Zealand have to take crucial decisions in
dealing with this new tax rate i.e.15% as Oct, 2010 is not so far away.
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