Tax Updates: 16 September 2024

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 [email protected].

GST-related Order in Council – a quick fix

In recent editions of AWIR, I have referred to the legislative drafting issue related to the GST adjustment rules and a number of clients’ GST refund claims that have been put on hold while Inland Revenue (IR) figured out what to do.

A couple of weeks back, I referred to the introduction of the latest tax bill – the Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Bill (No 73-1), which contains the relevant drafting amendment – ‘apply to a registered person’s adjustments made in returns for taxable periods starting on or after 1^st April 2023’, with retrospective effect to 1^st April 2023.

However, since the Bill may not be passed until close to March 2025, a temporary solution was required, which has come in the form of the Tax Administration (GST Adjustment Rules) Modification Order 2024 (SL 2024/189). The Order In Council (OIC) came into force on 10 September 2024 and will be revoked on 31 March 2025. Its sole purpose is to modify the application date for the new adjustment rules in section 21FB of the Goods and Services Tax Act 1985. The effect of the modification in the OIC is that taxpayers can make one GST adjustment for assets acquired before 1 April 2023 that have a permanent change of use on or after 1 April 2023. It will allow taxpayers and IR to process GST adjustments consistent with the policy intention of the simplification measures made in 2023 and in anticipation of the remedial legislation coming into force in 2025.

Accompanying the release of the OIC, is an 8-page special report titled ‘Tax Administration (GST Adjustment Rules) Modification Order 2024.’ The special report provides all the relevant background, explaining why the legislative change is required, and includes a table to explain what taxpayers should now do if they either want to apply the modification or not apply it, and they:

• have taken a tax position in a GST return that is consistent with the modification;

• have taken a tax position in a GST return that is inconsistent with the modification; or,

• have not yet provided a GST return.

The report concludes with a single example to illustrate the effect of the law with and without the modification.

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.