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Inland Revenue

Tax Policy

GST: Treatment of cash prizes for prize competitions

(Clauses 74, 75, 76 and 77)

Summary of proposed amendments

Section 10 of the Goods and Services Tax Act 1985 is being amended so that organisers of prize competitions will be able to deduct cash prizes from the total proceeds received for a prize competition when determining the consideration made for that supply. Sections 5 and 9 will be consequently amended to include references to prize competitions. A definition of “prize competition” will also be included in section 2.

Application date

The amendments will apply from the date of enactment.

Key features

These amendments will restore the position which existed for prize competitions before 1 July 2004, and extend the ability to deduct cash prizes to a wider range of competitions for which participants pay money to enter, and stand to win cash prizes. While this amendment uses the term “prize competition”, the phrase is given a slightly wider meaning than it has under the Gambling Act 2003 to include analogous competitions (for example, amateur sporting competitions) that are not covered by that Act.

Drafting changes will also be made to section 10(14) to make it easier to understand.


Before 1 July 2004, when determining the consideration of a supply, organisers of prize competitions were able to deduct cash prizes from the total proceeds collected for that supply.

The wording in the GST Act which permits cash prizes to be deducted was amended, effective from 1 July 2004, to use wording in the Gambling Act 2003. The wording in the GST Act had previously been based on terms contained in the Gaming and Lotteries Act 1977 which the Gambling Act replaced.

Some of the phrases and definitions contained in the Gambling Act are materially different from those which appeared in the Gaming and Lotteries Act. The phrase which is currently used in the relevant GST Act provisions is “gambling (including a New Zealand lottery)”. This is a narrower term than the collection of terms that was used before 1 July 2004, and does not include prize competitions.