MHK Chartered Accountants Make A Submission on GST Legislation

MHK Chartered Accountants are pleased to see legislation introduced on 26th February 2015 which clarifies the law on bodies corporate and GST. In a reversal of the Government's position last year, registration for GST is to be optional, not forbidden.  Ian Malcolm, Managing Director at MHK Chartered Accountants Ltd, was amongst those making a submission opposing the previously proposed legislation, and the reversal of position by the government shows they listened and common sense prevailed.

Bodies corporate will no longer be required to register for GST following the introduction of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Bill, Revenue Minister Todd McClay says.  Previously the government were going to prevent a body corporate of a leaky building claiming back GST on remedial work; now the Body Corporate will be able to claim back the GST if it is registered.

The Government had received GST when the original faulty work was done. If the repair work was done by the original builders it would not get a second bite of the cherry, whereas under the IRD's traditional position, that bodies corporate should not be registered for GST, it would, and that was double taxation. This is also consistent with the "preliminary but considered" view of Inland Revenue's lawyers that bodies corporate are legally separate entities from their owners. Their levies are consideration for services they supply, and supplying them satisfies the tests of a taxable activity.

The Government's practical concern had been that requiring bodies corporate to be GST-registered would impose pointless compliance costs. “The feedback we received confirmed that position and so this bill now gives the 13,800 bodies corporate, and the owners of 135,000 units, the choice," said McClay. The legislation just introduced gives bodies corporate the option to register for GST but does not require them to do so.

As reported in the New Zealand Herald, Robin Oliver, a former Deputy Commissioner of Inland Revenue in charge of tax policy, has also long argued that is the right outcome. If a body corporate has previously registered for GST it can continue to pay and claim back GST, while those which have not can remain unregistered or register and undertake the accompanying tax obligations.

Ian Malcolm from MHK Chartered Accountants Ltd agrees with this pragmatic approach which differed from the proposals in last year's issues paper, which called for a compulsory deregistration of most bodies corporate with retrospective effect. "We welcome the proposed solution, it gives bodies corporate the choice of being in the GST net or not.  This also stops the unintentional effect of GST registered Body Corporates having to pay back GST on assets held, also unfairly not claiming GST on costs yet to be spent out of funds in the bank, on which GST had already been paid to the IRD, which was patently unfair and would have given the IRD the unintended consequence of a GST windfall”, he said.

For more information on MHK Chartered Accountants please go to http://aucklandaccountant.net.nz .