GST & finance leases
IR has recently released draft interpretation statement PUB00357 titled “GST and finance leases” for review and feedback.
The draft IS is a 51-page document that sets out to provide the Commissioner’s views on how one should classify finance leases for the purposes of the time of supply and value of supply rules for GST.
With respect to the first element, being the time of supply rules, the first step in the process is to establish whether a particular finance lease is an agreement to hire, a hire purchase agreement, or something else (a third category agreement).
When the finance lease is an agreement to hire, successive supplies are deemed to occur, with each successive supply treated as taking place at the earlier of when a payment becomes due or is received. When however, the finance lease is a hire purchase agreement, the time of supply will be when the agreement is entered into. Finally, for a third category agreement, usually the general time of supply rule will apply, being the earlier of the time a supplier issues an invoice or receives a payment in relation to the supply.
In most cases, a finance lease will not be an agreement to hire where either, the lessee is the end user of the goods, and the lessor gives the lessee an option to purchase; or property in the goods passes upfront or will definitely pass under the terms of the agreement.
PUB00357 contains a useful flowchart to assist with determining the correct classification for a particular finance lease and it should be noted that both parties to the agreement should be applying the same classification.
The draft IS then proceeds to discuss ‘value of supply’ issues, and at the core of this element, is whether or not the finance lease is considered to be a credit contract. If it is, then one will need to ascertain the ‘cash price’ of the goods (which will usually be specified within the agreement itself), with the balance of any payments due under the contract relating to interest or finance charges.
Naturally with interest and finance charges being considered financial services and therefore exempt supplies, GST is only payable on the ‘cash price’ of the goods.
Now, you can essentially establish these core principles simply by reading the first four pages of the IS, which then begs the question as to what content the remaining 47-pages of the draft document contains. Well, it’s in those remaining pages that one locates the juicy detail relating to all of the aforementioned, and I suspect that if you manage to make it to the end (almost as much of a struggle as watching a Lord of the Rings movie), you’ll be an expert on finance leases and the associated time of supply and value of supply issues.
QWBA on Public Funds
Ever considered establishing and maintaining a ‘public fund’, donations to which a person may then be entitled to receive a donations tax credit or a deduction? Well if this is you, and you have unanswered questions, then I suspect that exposure draft PUB00372 titled “What is required to establish and maintain a ‘public fund’ under s LD 3(2)(d) of the Income Tax Act 2007?” is just what you have been waiting for.
I won’t spend too much time on the draft QWBA (as I suspect the majority on a Monday morning will simply yawn when they see this), but in essence it is a 23-page document that sets out on a journey to provide an answer in the Commissioner’s eyes, as to the key elements any person(s) looking to establish such a fund will need to satisfy, to ensure that the person (and their fund) can be registered as a donee organisation with the Department of Internal Affairs’ Charities Services, and can then appear on the list of donee organisations the Commissioner publishes for a donor to receive a donations tax credit or deduction.
Ok, so enough is enough, I can hear the snores, but for those that need it, you can at least go in search of more with the PUB reference number.
RSP 5th payment Amendment Order
At this stage likely to continue until at least Christmas I would expect (and potentially for quite some time post), the trigger of the next round (5th) of the RSP has also required a further amendment order to the Covid-19 Resurgence Support Payments Scheme (August 2021) Order 2021 (the August Order), to update the ‘specified period’ for the latest payment.
Consequently, the Covid-19 Resurgence Support Payments Scheme (August 2021) Amendment Order (No 5) 2021 came into force on 12 November 2021, and amends the specified period for the fifth grant to commence on or after 5 November 2021, and to end immediately before all areas of New Zealand either return to Covid-19 alert level one, or are at ‘orange’ or ‘green’ under the Covid-19 Protection Framework (the latter being why I think at least Auckland will see the RSP being in place for some time to come yet, as I suspect we will be in ‘red’ for a number of months).
As a reminder, although I am sure it’s probably no longer required, to be eligible for the RSP:
- The person must have experienced a minimum 30% decline in revenue in relation to a business or organisation during a nominated seven-day period, and
- the nominated seven-day period must be during the specified period for that grant.
This article from the ‘A Week in Review’ newsletter was originally published Monday 15th 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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