GST Registration Effective Dates…
Recently released ED0206 is a draft Standard Practice Statement (“SPS”) describing how IR will approach GST registration applications, particularly those applying for voluntary registration and with a retrospective effective date.
The SPS first sets out that required registrations (supplies exceeding registration threshold) will usually have an effective date which coincides with the date the person becomes liable to be registered for GST, which could be at a date which is earlier than the application date, although there is discretion for the date to be a later date than the “first becomes liable to be registered date”, where considered equitable. However the SPS suggests such discretion is rarely applied.
The issue of voluntary registration is then discussed. Usually IR will assign an effective date that coincides with the date the Commissioner is satisfied that the person was able to be GST registered. In this respect, the SPS suggests that in exceptional circumstances, IR may approve a retrospective effective registration date requested by the applicant (our experience to date however, would suggest approval commonly granted in less than exceptional circumstances – perhaps we will now see a change).
Several examples are provided of when a retrospective date may be approved, including circumstances involving sickness or absence overseas preventing an earlier application being filed, the person holding an honest belief that registration would just occur automatically or the person holding a genuine belief that they were ineligible to register and then later discovering that this was not the case.
Finally the SPS discusses land transactions, and the use of the discretion to backdate the registration effective date in this regard. In most cases it appears that the practice will be to simply apply a current or future registration date, which should not cause too much distress for the applicant provided their application is filed prior to settlement date of the land transaction (the relevant date for CZR purposes). However, do not expect retrospective applications to be approved simply to accommodate your client’s desire to obtain a second-hand goods claim with respect to land acquired from an unregistered vendor, at a date earlier than the first adjustment period following the registration date, where they would otherwise be able to make a claim for assets introduced into the taxable activity.
Any comments on ED0206 are requested by 31st May 2018.
Changing your Balance Date…
IR has released SPS 18/02 (replacing SPS 08/04), setting out their practice with respect to requests for balance date changes (standard/non-standard, non-standard/standard, non-standard/non-standard). All such requests should be made in accordance with s.38 of the Tax Administration Act 1994 (“TAA94”).
SPS 18/02 includes the following as examples where an application to change will usually be approved:
- Where it can be demonstrated that the nature of the taxpayers business makes a 31 March balance date impractical;
- To align with an agreed industry balance date;
- To allow a shareholder-employee to use the same balance date as the company from which they derive their primary source of income;
- To allow a subsidiary company to use the same balance date as the parent company.
However applications to change a balance date are unlikely to be approved where:
- a reason for the change is to defer the payment of tax/take earlier advantage of a tax incentive/concession than would otherwise not have been the case had no change of balance date occurred;
- the request has been made because of a wish to smooth out administrative workloads within the customer’s business (setting aside matters relating to seasonal businesses);
- the non-standard balance date is the anniversary date of the commencement of the business, unless that date coincides with an agreed industry balance date.
SPS 18/02 sets out the various ways in which a person may apply for a balance date change, which depending on the reason used, could be via MyIR, telephone or written correspondence. In most cases the change in balance date will be applied in respect of the income year following that during which the request to change is made, although retrospective application may be approved in limited circumstances.
Finally, the statement provides commentary on the consequent implications of a balance date change for provisional tax payments and GST filings, and includes a couple of useful appendices.
Useful IR Website Updates…
The following updates have been added to IR’s website which may be of interest to you:
Payday filing – while electronic filing will be mandatory for those above the threshold from 1st April 2019, there is an option to voluntarily commence from 1st April 2018. Further information in this regard can be found at http://www.ird.govt.nz/news-updates/payday-filing.html.
Cryptocurrency and tax – IR has issued some preliminary commentary surrounding the tax issues associated with bitcoin and other cryptocurrencies. The initial view is that cryptocurrency is property, not currency, therefore not subject to the financial arrangement rules (which would have taxed any gain on disposal), but instead to the general considerations given to disposal of any property – particularly whether it is being held on capital or revenue account. A key issue here, will be whether IR considers that the property has been acquired with a resale intent and/or purpose. In this respect, IR refers potentially affected parties to its recently published views on gold bullion, on the basis that the taxing considerations are similar. Neither property will generate returns over the life it is held, instead only providing a result for the investor at the time of disposal or exchange. IR consider that this characteristic alone would be strongly indicative of an “acquisition for resale purpose”, and consequently any profit should be assessable. However they do leave a door open for the taxpayer to prove in the alternative. More commentary on the issue can be found at http://www.ird.govt.nz/income-tax-individual/cryptocurrency-qa.html.
Dual use of premises – recent legislative amendments introduced for the 2017/18 income year, a new standard cost formula method for calculating home office claims, to remove the need to keep accurate records of costs such as electricity and the like, in order to calculate home office claims. To facilitate use of the new formula, each year IR will advise a standard square metre rate, which will be multiplied by the area of the home determined by the taxpayer to be used for business purposes. Added to that result to determine the final claim amount, will be the relevant portion of rates/rent and mortgage interest – costs not included in the standard cost due to their variability across taxpayers. The standard per square metre rate for the 2017/18 income year is $41.10.
Bright-line extension – further detail on the extension of the bright-line period from two years to five years can be found at http://www.ird.govt.nz/news-updates/brightline-extension.html.
Richard Ashby BBus, CA, CPA PARTNER
Ph: +64 9 365 5532
Fx: +64 9 309 5260
Mb: +64 21 823 464