Government To Raise Compulsory Registration Threshold For GST

"An estimated 25,000 people and businesses will be able to opt out of making GST returns under legislation to be introduced into Parliament next month," Revenue Minister Michael Cullen said today.

"The Government plans to raise the compulsory registration threshold for GST from $30,000 to $40,000.

"It is one of a series of wide-ranging changes designed to lower the compliance costs of GST and to improve the workability and effectiveness of the tax.

"The amendments arise from a government review, begun two years ago, into the impact on GST of developments in business, technology and the economy in the 14 years since the tax was introduced, to see where improvements can be made and to update the law where necessary.

"Most of the proposed changes have been subjected to extensive consultation since the publication of a discussion document last year. Officials have met with many of those who made submissions and as a result of those discussions several of the original proposals have been modified," Dr Cullen said.

"These are changes that will affect people and businesses who collect GST. They are not likely to affect consumers or even be noticed by them.

"Another way to reduce compliance costs is to make it easier for people when calculating GST to make adjustments for items that involve both business and personal use. For example, the forthcoming changes will increase taxpayers' ability to make one-off rather than periodic adjustments.

"We also intend to introduce changes to counter avoidance of GST. These will include measures such as restricting the second-hand goods credit in transactions between associated persons so as to stamp out any remaining potential for abuse in this area.

"The rules relating to de-registration for GST will also be tightened. This will ensure that the GST treatment of assets sold after de-registration is the same as that for assets sold before de-registration. Assets acquired before GST was introduced may continue to be valued at the lower of cost or market value.

"Another anti-avoidance measure will be aimed at deferred settlements where a purchaser and vendor on different accounting bases are able to claim, respectively, an upfront credit but significantly defer the payment of output tax.

"Other changes are aimed at clarifying the law. For example, the definition of 'financial services' will be clarified in areas such as debt collection services and futures contracts.

"The zero-rating of exports will be extended to include information services exported to non-residents outside New Zealand, and services provided to non-residents in relation to exports, such as testing produce that is to be exported.

"We are also introducing changes intended to help the racing industry, such as zero-rating sales of horses that die before they are exported. This will remove anomalies in this area.

"The second stage of the review is looking at the treatment of imported services and whether the Australian approach of a reverse charge mechanism should be introduced here. It is also considering wider issues relating to financial services with a view to reducing the considerable compliance costs faced by those in this sector," Dr Cullen said.

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