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Inland Revenue

Tax Policy

Chapter 1 - Background

1.1 Goods and services tax (GST) taxes consumption in New Zealand. Consistent with New Zealand’s tax policy settings, GST is imposed at a single rate of 15%, across a broad base of goods and services with few exemptions. Its purpose is to tax consumption of different goods and services evenly and efficiently, without distorting consumers’ preferences between different goods and services.

1.2 As a tax on consumption, GST should not be a cost to businesses. Although businesses may be charged GST on goods and services they purchase, GST-registered businesses may recover this by deducting it against the GST they are liable to pay on their own sales. When a GST-registered business incurs more GST on these purchases than it is liable to pay on its own supplies, it will be refunded the difference.

1.3 GST is not intended to tax the consumption of goods and services outside New Zealand. Supplies exported and consumed offshore will typically be zero-rated – GST will not be charged on the supply.

1.4 While the GST system generally works well, a number of GST-related concerns have been raised by private-sector stakeholders and by officials since the last GST omnibus discussion document in 2012.[1] These concerns do not reflect issues with the policy underlying GST, but relate to areas where the legislation does not fully give effect to the policy intention, or areas where technical changes could improve the way the system operates.

1.5 A number of these concerns are discussed in this paper, and possible solutions suggested.

1.6 The key issues covered are:

  • the deductibility of GST associated with the costs of raising capital;
  • the eligibility of large, partially exempt, businesses to agree an alternative method of apportionment;
  • the ability to take a deduction for secondhand goods, for goods composed partially of gold, silver and platinum; and
  • the ability to zero-rate services provided in connection with land in New Zealand.

1.7 Some technical and remedial changes are also suggested. They include:

  • providing more flexibility in the agency rules to agents acting on behalf of purchasers and their principals;
  • providing for more consistent treatment of accounting for GST on supplies of goods and services where total consideration is not known at the time of supply;
  • allowing zero-rating of goods and services that are provided in relation to ships and aircraft that are exported under their own power; and
  • ensuring a person remains eligible to receive a refund for overpaid tax due to a clear mistake or simple oversight where they were in a tax payable position during the relevant period.

1.8 Subject to submissions on this issues paper, it is expected that the proposals would be included in the next available omnibus tax bill.

1.9 Your comments on the solutions suggested in this paper are welcomed. We would appreciate your submissions by 30 October 2015.

1.10 Submissions should include a brief summary of major points and recommendations. They should also indicate whether the authors are happy to be contacted by officials to discuss the points raised, if required.

1.11 Submissions should be addressed to:

GST – Current issues
C/- Deputy Commissioner, Policy and Strategy
Inland Revenue Department
P O Box 2198
Wellington 6140

Or email: [email protected] with “GST – Current issues” in the subject line.

1.12 Responses to this paper may be the subject of a request under the Official Information Act 1982, which may result in their publication. The withholding of responses on the grounds of privacy, or for any other reason, will be determined in accordance with that Act. If you consider that any part of your letter should properly be withheld under the Act please clearly indicate this.


1 GST remedial issues, 18 December 2012.