Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 

Govt moves to shut GST loophole on charities' asset sales

Govt moves to shut GST loophole on charities' asset sales

By Gavin Evans

Aug. 14 (BusinessDesk) - The government is moving to close a GST loophole that could have created a “significant but unquantified” risk to the Crown’s revenue.

A supplementary order paper introduced today clarifies the rules on GST and will prevent non-profit groups from avoiding GST on income from asset sales, Revenue Minister Stuart Nash says.

The change was signalled in a May 15 issues paper and will be effective from that date. It stems from a new interpretation by Inland Revenue’s Office of the Chief Tax Counsel as to what constitutes the taxable activities of a not-for-profit organisation. That interpretation, endorsed by Crown Law, was that if an organisation sold an asset that did not form part of its taxable activities, the sale would not be subject to GST.

“The new interpretation is not consistent with the way the GST rules have been applied and understood in the past,” Nash said in a statement.

“If GST expenses have been claimed by a non-profit body in relation to an asset, GST should apply to the asset when it is sold or there is an equivalent event, such as an insurance pay-out.

“The tax system is based on fairness, and being simple and efficient to operate. The new interpretation threatens those principles and the law change restores certainty.”

The change will be effected through the Taxation (Annual Rates, Modernising Tax Administration, and Remedial Matters) Bill currently making its way through Parliament.



The supplementary order paper will also extend depreciation roll-over relief for Canterbury firms affected by earthquakes.

Nash said he had been advised at least 40 firms would be adversely affected if the current depreciation rules were not extended out to 2023-24 income year.

“The tax issue arises because an insurance payout on a depreciable asset can attract a tax liability which may cause consequent cash flow problems. We do not want to hinder the city’s recovery or unfairly burden these taxpayers,” he said.

(BusinessDesk)

© Scoop Media

 
 
 
Business Headlines | Sci-Tech Headlines

 

Electricity Market: Power Panel Favours Scrapping Low-Fixed Charges

An independent panel reviewing electricity prices favours scrapping the government’s low-user fixed charge regime, banning the use of prompt-payment discounts, and requiring greater disclosure of the profit split between the retail and generation arms of the major power companies. More>>

ALSO:

Bottomless Oil And Zero Climate Cost: Greenpeace Not Big On PEPANZ Gas Ban Report

The NZIER report commissioned by oil industry body, PEPANZ, claims the oil and gas ban issued by the Government last April could cost the the New Zealand economy $28 billion by 2050... But Greenpeace says the figures in the report are based on false assumptions and alternative facts. More>>

ALSO:

Sunday Fruit Fly Update: Devonport Fruit And Veg Lockdown

Work continues at pace on the biosecurity response following the discovery last week of one male Queensland fruit fly in a surveillance trap in the Auckland suburb of Devonport. More>>

ALSO:

Digital Services Tax: Government To Plan Tax On Web Operator Income

New Zealand is to consult on the design of changes to tax rules which currently allow multinational companies in the digital services field to do business here without paying income tax. More>>

ALSO: