Tax Blog

As you will recall when this Bill was introduced for first time it included GST changes to Kiwi Saver fees which caused much media hype and eventually the Bill being withdrawn.

The new Bill no longer includes those proposals. This process has been a failing of the Government to manage the proposals and the withdrawal of the Bill was a knee-jerk reaction to a media storm, none of this results in good tax policy.

There are several significant changes in the Bill which have not received any significant media commentary.

GST on Airbnb and Uber

Maybe one of the most significant is the proposal to require electronic marketplaces to charge and account for GST in relation to listed services. What this effectively means is that electronic marketplaces which facilitate the supply of accommodation (eg Airbnb), ride sharing (eg Uber) and food and beverage delivery would become subject to GST from 1 April 2024.

These changes are justified on the basis that local providers typically would charge GST and therefore it is appropriate that GST is also charged by these marketplaces. However, the rules acknowledge that a number of the underlying providers will not be GST registered and therefore a “flat-rate credit” at 8.5% of the value of the listed services will be provided to the marketplace and passed on to an unregistered operator.

Interestingly the 8.5% flat-rate credit was not signalled in the earlier discussion document and the science behind these calculations therefore requires some testing.

Electing out of GST for certain assets

Another GST change in the Bill is the ability to elect that a good sits outside the GST net where no input tax deduction has been claimed, the good was not acquired for the principal purpose of making taxable supplies and has not been used for the principal purpose of making taxable supplies. This change is intended to address issues which have arisen where a GST registered person (for example a farmer) owns what is effectively a private asset (e.g. a farmhouse or a holiday house in Queenstown) and from time to time uses it in their taxable activity (e.g. Home office or Airbnb rental on the holiday home). Without this change the asset was arguably part of the taxable activity, even if no GST had been claimed, and a full GST liability would have resulted on sale. This change is therefore a practical solution to a problem that has arisen from time to time. The election is made at the time of sale and accordingly people who have been concerned about this problem but have not sold the asset benefit from the proposed solution.

The above are just two significant changes contained in the tax Bill. As always, we are happy to assist you in understanding the implication of these if they affect you.