QUICK U-TURN ON KIWISAVER GST PROPOSAL. In perhaps one of the quickest U-turns ever, the Government has announced that it will not be proceeding with a controversial proposal to standardise the application of GST to fees and services of managed fund providers.
The proposed amendments were to make manager and investment manager services supplied to managed funds, and manager and investment manager services supplied to retirement schemes, including KiwiSaver schemes, subject to GST at the standard rate of 15%.
Currently these services are exempt supplies of financial services, and therefore not subject to GST.
The backflip in policy occurred just one day after the Taxation (Annual Rates for 2022-23, Platform Economy, and Remedial Matters) Bill was introduced into Parliament on 30 August 2022. The omnibus Bill contains a number of amendments on a wide range of matters, including remedial updates to the recent interest limitation provisions and changes to the bright-line rules. However, it was this particular GST proposal that received the most interest, with NZ Herald and Stuff running articles titled “Government quietly introduces $103 billion tax on KiwiSaver” and “'Tax grab': Government plans to levy GST of $225 million each year on KiwiSaver fees”, respectively.
In a statement released on 31 August, Minister of Revenue, the Hon David Parker, explained the change in position was due to “the importance of public confidence in KiwiSaver and the need to ensure nothing unduly affects New Zealanders’ willingness to save”. The Minister said that New Zealanders’ KiwiSaver contributions and balances were not going to be taxed under the proposed amendments but it was clear from the reaction to the proposal that it had caused concern for Kiwis.