21 July 2003 Media Statement

GST law on payments to local authorities to be clarified

The government will introduce legislation to clarify GST law in relation to certain payments imposed by local authorities under the Resource Management Act, Revenue Minister Michael Cullen announced today.

“Local authorities may seek financial contributions from applicants for resource consent if, for example, development work such as a new subdivision requires them to provide additional new infrastructure under their district plan,” Dr Cullen said.

“These financial contributions should be subject to GST, in the same way that resource consent applications fees are. Although most local authorities have treated financial contributions in this way, the law on this point is not entirely clear. The proposed legislation will clarify that they do indeed attract GST, an amendment that will apply from 1 October, 1991.

“The amendment will not apply to local authorities that have not charged GST on financial contributions of this kind before the date of enactment.

“Similar clarifications will also ensure that development contributions under the Local Government Act are subject to GST, and that late payment penalties imposed by local authorities under the Local Government (Rating) Act are exempt from GST, both with effect from 1 July, 2003.

The government will ask Parliament to include these GST changes in the taxation bill that was recently introduced into the House,” Dr Cullen said.

ENDS

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