GST and the credit card service fee

(Clause 131)

Summary of proposed amendment

Section 226C of the Tax Administration Act 1994 is being amended to clarify that fees charged under that section are GST-exclusive.

Application date

The amendment will apply from the date of enactment.

Key features

Clause 131 amends section 226C of the Tax Administration Act 1994 to clarify that GST does not apply to the amount of fees charged under that section.

Background

Section 226C of the Tax Administration Act 1994 allows the Commissioner to charge taxpayers a fee, if they choose to pay their tax and social liabilities by credit card. The current fee is set at 1.42 percent of the total transaction and may be changed by Order in Council. The change proposed in the bill makes it clear that if GST is payable on a particular service fee, the amount set in legislation is exclusive of GST.

The fee is passed on to domestic-based student loan borrowers and child support parents by Inland Revenue because the cost of absorbing the fee is too high. These individuals also have other practical ways in which they are able to comply with their repayment obligations, such as via internet banking. Inland Revenue will, however, continue to absorb the fee for credit card payments made by overseas liable parents and overseas student loan borrowers to help reduce their compliance costs.