GST & deferred payment terms
IR has issued PUB00330, a draft QWBA which looks to provide an answer to the question of when a person registered for GST on a payments basis can claim an input tax deduction for goods purchased on deferred payment terms.
I expect the most of you will already have an appreciation, that where a person is registered for GST on a payments basis, generally any input tax deduction claims are limited to the extent that a payment has actually been made in relation to the relevant supply, during the particular GST period.
The answer provided in the draft QWBA commences down this path, but then hits a crossroad where the type of agreement involved in the supply is either a hire purchase agreement or a lay-by agreement.
A hire-purchase agreement requires you to turn right and take that path, and obtain the unexpected benefit that even though you are registered on a payments basis, in this instance, you can actually make a full input tax claim in the taxable period within which the hire purchase agreement was entered into.
A lay-by agreement on the other hand, requires you to turn left, where you discover a few steps down the path, that even though you have made a couple of payments during the taxable period which under the general rule would entitle you to claim the input tax with respect to the payments made, you suddenly find yourself standing before an impenetrable wall, which prevents you from making any input tax claims in respect of the payments you have made. Only once you have made the final payment and the goods have been transferred to you, does a ladder magically appear before you, enabling you to now scramble over the wall and access the full input tax credit claim that’s waiting for you beyond the wall, in the taxable period within which title to the goods has passed to you.
Now a subset of standard sales agreements which you may be encountering a lot more frequently, are buy now, pay later agreements – common examples being Afterpay, Humm and Zip. Under such agreements, the purchaser gets immediate possession and ownership of the goods and pays for them in instalments. The terms are often interest-free, but other charges likely apply. The retailer receives payment from the ‘buy now, pay later’ provider, and that provider assumes all the risks should the purchaser fail to make any payments. When it comes to the claiming of the input tax credits for a person registered on a payments basis, you can continue on the path straight ahead of you at the crossroads, and make you input a tax claim under the general rule, provided you are confident that the ‘buy now, pay later’ agreement does not fall into either the hire purchase or lay-by agreement categories.
If you are not sure of what defines whether an agreement is a hire purchase agreement, or a lay-by agreement, and consequently whether a special time of supply rule may apply, then page five of the QWBA provides a definition of the former and page seven the latter.
Helpful as always (well usually in most cases), are the examples provided in the QWBA to illustrate the key points of the narrative.
If you wish to have your say, then Christmas Eve is your deadline. Hard to believe it’s not that far away now – where did 2021 suddenly go?!
Student loan repayment threshold to rise
For those of you with student loan debt (or were silly enough like me when your kids were young teenagers, to suggest you’d pay for their higher level education and they’re now holding you to it – so it’s like you have a student loan debt, yet you haven’t studied for 20 years!), you’ll potentially have a few more pennies in your pocket from April 1st 2022, when the student loan repayment threshold increases from $20,280 to $21,268.
This article from the ‘A Week in Review’ newsletter was originally published Monday 22nd November 2021. If you have any questions or would like a second opinion on any national or international tax issues, please contact me firstname.lastname@example.org.
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