Tax Updates – 30th August

Directors’ fees & GST

Inland Revenue has reissued its guidance on the GST treatment of directors’ fees and board members’ fees, replacing the three Public Rulings that have applied since 2023. BR Pub 26/01, 26/02 and 26/03, together with an accompanying Commentary, take effect from 7 August 2026 and set out when a director or board member must charge GST on the fees they receive, and when the company or organisation paying those fees can claim an input tax deduction.

The starting position has not changed: engaging a person as a director, or as a chairperson or member of a board, council or committee, is excluded from the GST definition of a “taxable activity”. That exclusion is overridden, however, where the office is accepted in carrying on the person’s own separate taxable activity – for example, where a sole trader or a business owner takes up a directorship because of, or in connection with, their existing enterprise. In that situation the fees become subject to GST, and the paying company or organisation can claim an input tax deduction provided it holds the correct taxable supply information. Whether the office was accepted “in carrying on” a taxable activity is a question of fact and degree, and the Commentary’s worked examples show how finely this can turn.

The Rulings also confirm the GST outcomes where a director or board member is engaged through a third party, through their employer, or as a partner obliged to hand fees on to a partnership – in each case, a deemed or genuine second supply may arise, with its own GST and input tax consequences. The key practical change is to section 6(4), which now correctly extends to board members appointed by the Governor-General or Governor-General in Council. Previously, an omitted cross-reference meant organisations could not claim an input tax deduction where such a board member’s fees were paid on to an employer; that gap has now been closed.

For clients who hold directorships or board positions, or who engage directors and board members, the key issue is capacity: is the office held personally, as part of an existing taxable activity, as an employee, or as a partner obliged to account to a partnership? Getting this wrong affects whether GST should be charged at all, and whether an input tax deduction is available. Anyone affected by these changes, particularly organisations dealing with Governor-General appointees, should review their arrangements against the reissued Rulings, which apply indefinitely from 7 August 2026.