Tax Updates: 6 November 2023

Welcome to this week’s review of tax issues where Richard comments on what’s been happening in the world of tax over the past week. If you have a question or would like a second opinion on any national or international tax issues, please contact Richard via email at richard@gilshep.co.nz.

GST & Bodies Corporate

Inland Revenue (IR) has just released IS 23/08, titled ‘Goods and Services Tax – Unit title bodies corporate’. The IS explains the consequences of a unit title body corporate (UTBC) registering for GST and how GST applies to transactions between a UTBC, its members and third parties.

You may recall legislative changes in recent times to the Goods and Services Tax Act 1985, which consequently now has specific rules that apply to UTBCs. While most UTBCs are not liable to be GST registered (because the value of supplies to its members is not counted towards the $60,000 GST registration threshold), a UTBC can voluntarily register for GST. Once registered, a UTBC must make a one-off output tax adjustment based on the money and investments it holds. A GST-registered UTBC needs to account for output tax on supplies to its members but can generally claim input tax deductions on transactions with third parties.

For UTBCs that are registered for GST, the IS sets out the GST treatment of:

• Goods and services a UTBC acquires before registration;
• Services that a member supplies to a UTBC;
• A UTBC’s supply of manager’s accommodation;
• A UTBC’s payments of ground rent and levies it charges to members for ground rent; and,
• One-off payments a UTBC receives (such as settlement payments, court awards, insurance payments and Ministry of Business, Innovation and Employment (MBIE) payments).

The IS is also accompanied by two fact sheets:

• IS 23/08 FS 1, ‘Unit Title Bodies Corporate considering registering for GST’ — guidance for UTBCs considering registering for GST; and,
• IS 23/08 FS 2, ‘GST registered Unit Title Bodies Corporate’ — guidance for GST registered UTBCs on transactions they may encounter.

The IS is a 42-page document, so happy reading if the topic is relevant and/or of interest to you.

This article was originally published through the ‘A Week In Review’ newsletter. If you would like to receive Richard’s tax updates every Monday morning, you can subscribe here.