Tax Updates: 3 March 2025

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 taxable activity

Inland Revenue (IR) has released a draft interpretation statement (IS) titled “GST – taxable activity.” The IS considers the meaning of the “taxable activity” definition contained within section 6 of the Goods and Services Tax Act 1985 and is more general in application than previous publications on the item, which covered specific areas like subdivisions of land and horse racing/breeding.

The document is 31 pages in length and is referenced PUB00476.

I expect that for most of the enquiries you receive on the issue, it will be clear whether or not a taxable activity exists for your client. This is one of the critical elements in determining whether GST registration is required in accordance with section 51, which then triggers the obligation to charge GST on a supply in accordance with section 8.

The draft IS is divided into nine separate components, which cover separate elements of the wording of the taxable activity definition contained within section 6, the extension of the definition to cover “anything done in connection with the beginning or ending,” and the exclusions from the definition contained within section 6(3).

I suggest in the first instance that as a reference tool for your research, this latest IS will come in handy to direct you to the more specific publications on the issue (where that specific guidance should be followed instead of this document’s more general approach). It will also provide a reference point to the large number of both Taxation Review Authority (TRA) and New Zealand (NZ) court decisions, which have ruled on the issue whenever a dispute between the Commissioner and the taxpayer has made it that far.

Very early in the draft IS, I noted a key point that I have been asked the question on over the years – your client may be carrying on more than one separate taxable activity. However, they will only ever have one GST registration. In other words, to apply section 51 and determine whether your client has an obligation to be GST registered, the annual turnover of all taxable activities must be combined to determine whether the registration threshold has been exceeded. If this is the case, then GST must be charged on all supplies made in relation to each separate taxable activity being carried on.

In my humble opinion, the main interpretive ambiguity of the taxable activity definition is the words “continuously or regularly,” as if the activity is neither of these, then your client will not have a “taxable activity,” thereby requiring consideration of section 51. In this context, I should note that a large portion of my advisory work involves land subdivision, where clients are clearly carrying on an activity, whether or not for a pecuniary profit, that involves or is intended to involve the supply of goods and services to others for consideration. So, the only remaining question is whether that subdivision activity would be considered “continuous” or “regular” – often not the latter because it is a one-off project for the client.

At the very least, if you do not have either the time or, more likely, the desire to read all 31 pages of the IS, then I suggest reading paragraphs 17 to 30 (with examples to illustrate) is wise, to ensure a basic comprehension of these interpretative grey aspects of the definition.

Earlier in this article, I suggested that the IS also covered the legislative exclusions within section 6(3). However, because covering all the exclusions was considered by IR to be such a significant topic and would take up a disproportionate part of the IS, only the exclusion that relates to a private recreational pursuit or hobby (which itself takes up nine pages) has been included.

Considering the importance of the topic, reading the full document would be time well spent, and if you wish to go even further and make any submissions on the draft, you should ensure that you do so no later than 4^th April.

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.