Wāhanga 2 - Ngā ratonga Part 2 - Supplies

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GST workshop - Supplies

We're here to help

Part 2

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An introduction to GST, supplies.

When you’re registered for GST, there’s important information you should know about how different transactions are treated.

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What are supplies?

Goods or services you provide while carrying on your business

• Taxable
• Zero-rated
• Exempt
• Special

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Supplies are goods or services you provide while carrying on your business.

For GST purposes, supplies are dealt with differently, depending on the type of supply.

There are 4 types that we’ll discuss here.

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Supplies – Taxable

Supplies are goods or services you provide while carrying on your business

Taxable supplies are the normal goods and services provided by most businesses.

GST is charged at 15%

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Taxable supplies are your regular sales and expenses, and include GST at 15 percent.

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Supplies – Exempt

• Exempt supplies do not have GST
• Finance charges like eftpos fees, bank fees and interest
• Residential Rent

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Exempt supplies are transactions that don’t have GST, and therefore are not included in your GST returns.

Common examples are finance charges, like EFTPOS fees, bank fees, and interest.

Residential rent is also an exempt supply.

If your business claims for a home office, you don’t include your rent or your mortgage interest in your GST return.

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Supplies – Zero-rated

• Zero-rated supplies have 0% GST
• Exports / sales to overseas customers
• Sale of a business as a going concern

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Zero-rated supplies are transactions that include GST, but the GST rate is 0 percent.

A common example of zero-rated supply is exports.

If you make a sale to an overseas customer, then that sale is most likely zero-rated, and the GST will be recorded as 0 percent.

There are some exports that do incur GST. Check the details on our website for examples.

If you make sales to overseas customers, it’s a good idea to have 2 sales columns in with your records, 1 for New Zealand customers with 15 percent GST, and 1 for overseas customers with 0 percent GST.

When you complete your return, you’ll need both of these figures, so, it’ll save you time by having 2 separate columns in your cashbook.

Another example of a zero-rated transaction, is the sale of a business where both parties are GST registered.

The full criteria for zero-rating the sale of a going concern is on our website.

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Supplies – Special

• Hire purchases
• Lay-bys
• Second-hand goods
• Description of goods
• Date of purchase
• Cost
• Name and address

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Special supplies are different to your normal business sales and expenses. GST is claimed as follows.

For hire purchases, claim the full GST at the time you sign the hire purchase agreement. This is regardless of your accounting basis.

Claim the GST amount as a credit adjustment in your return.

Don’t claim GST again on the instalments.

Another special supply is lay-buys.

If you purchase a business item using lay-by, you’ll claim the expense when you take ownership of the goods.

This’ll be at the time of the final payment.

Second-hand goods are also classed as a special supply.

If the seller isn’t registered for GST, or the goods are being purchased privately, there won’t be any GST charged.

However, you will still claim GST on the purchase price, under the second-hand goods rule.

You’ll need to keep a record of the description of the goods, the amount you paid, the date of the purchase, and the name and address of who you bought the goods from.

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Supplies – Associated persons

• Close family members like a spouse, sibling, parent or grandparent
• GST is limited to the lesser of GST on the:
• Purchase price
• Market value
• Original GST paid

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Be aware there are special rules that apply for purchases between associated persons.

Associated persons are close family members, such as a spouse, sibling, parent, or grandparent.

In these cases, the GST claimed may be limited, or even nil.

Purchases of second-hand goods between associated persons are limited to the lesser of the GST on the purchase price, the GST on the market value, or the GST originally paid by the seller.

For example.

If a GST registered person buys a second-hand car from their sister, and the sister brought the car from a dealer, the purchaser can claim the GST on their purchase price, the market value, or the price their sister paid for the car, whichever is smaller.

If the sister brought the car privately, no GST can be claimed by the purchaser.

This is because the lesser amount is 0 GST paid by the sister.

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Tax relief - COVID-19 Coronavirus

• If you've been affected by the downturn in business due to COVID-19 coronavirus, we have a range of ways to help.
• Talk to your tax agent, visit ird.govt.nz/covid19, or phone 0800 473 566 for more information.

Go to ird.govt.nz/covid19 for more information.

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The Government has introduced a number of ways to support businesses that have been impacted by COVID-19.

This includes options with respect to tax relief.

For the latest updates please go to our website and view the COVID-19 page.

You can also contact your tax agent, or ring our contact centre to discuss your specific situation.

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