Revenue Minister Todd McClay announced on 06 June his intention to clarify through legislation that bodies corporate will not after all be required to register for goods and services tax.
That has been Inland Revenue’s traditional position.
However, a review of the law undertaken by the IRD’s chief tax counsel and released more than a year ago arrived at the “preliminary but considered” position that bodies corporate are legally separate entities from their owners. Their levies represent consideration for services they supply and supplying them satisfies the tests of a taxable activity.
The Government now proposes to legislate in the next available tax bill to change the law so that bodies corporate are no longer able to register for GST and receive GST input tax credits for the GST they pay on goods and services they purchase.
This would take effect from the day before McClay’s announcement.
The discussion document, released on June 6 says a “savings” provision will be provided for bodies corporate currently registered for GST which will mean that they apply the new rules from yesterday and the existing law for earlier periods.
Oliver said many office buildings have a unit titles structure and have long been registered for GST. The proposed legislation has a look-through rule for unitholders who are registered for GST.
“This proposal will materially increase compliance costs in that the GST portion is claimed by the unitholder and not that body corporate. This will mean monthly reporting of detailed financial information (ie each payment which has a GST content) to every unitholder,” Oliver said.
And in the meantime what law should those bodies corporate apply, the existing one or what the minister has announced will apply from yesterday (06 June) whenever the legislation gets changed? And what if there is a change of Government before then?
