Category Archives: GST

Comments, questions and answers about Goods and Services Tax

Methodist Church GST System

On the 30 June 2016 the Methodist online GST system will be shut down while upgrade work is carried out. You will NOT be able to log onto the site and create new GST returns on that day.
The upgraded site will be up and running again on 1 July. Your usual user name and password will NOT change and still work on the new system. You should not notice any other changes. All your previous returns will flow through into the updated system also.
Could you please note this change in your diary.

GST System

Changes have been made to the GST System so that you are able to enter the year 2016.

When you first log back onto the GST System and then go into “Create GST Return” you may not see the dates appear correctly.  If this happens, you need to force your web browser to refresh itself so that it goes back out to the internet and gets the latest version of the web page.  To force your web broswer to do a refresh use the following key combination:

Windows: ctrl + F5
Mac/Apple: Apple + R or command + R
Linux: F5

If you continue to have issues, please let Peter van Hout know.

Monthly GST Returns

In recent weeks I have needed to deal with a small number of Methodist entities that have either NOT supplied a GST return or have supplied a GST return covering a number of months.

The Methodist Church is required by the Goods and services Act to provide the Inland Revenue Department with a monthly GST return covering the correct period.  For example, today is the 29 October 2015.  Yesterday we were required to lodge the GST return for the Methodist Church for the month of September 2015.

While I appreciate that many people doing this work are volunteers and do the work to the best of their abilities, the Church is still required to follow the law.  I would ask you to lodge the GST return in the correct month and by the due date so that we can be assured that the Church meets its legal obligations.

I would refer you to Information Leaflet No. 64 which relates to GST.  This can be found on the Methodist Church website (www.methodist.org.nz).  A hard copy can also be requested through the Connexional Office.

Claiming GST on Second-hand Goods Used Within the Church (Not being Donated Goods)

In some situations you may have purchased second-hand goods to use in the Church to make taxable supplies for GST purposes but didn’t pay GST on the purchase because the seller wasn’t GST registered. The good news is you can still claim a GST credit as long as the goods were located in New Zealand at the time of purchase and you have sufficient records of your purchase.

You may consider buying second-hand items for the Church to save money. Even if the seller isn’t GST registered you can still make a claim for GST.

 Example

Alice purchased a number of second-hand chairs to use in the Church.

She bought the chairs for $160 at a garage sale.

To calculate the GST amount to claim as a credit she would use the following formula: purchase price x 3 ÷ 23 = GST credit that can be claimed $160 x 3 ÷ 23 = $20.86

Alice can claim this amount on the next GST return, as long as she’s kept sufficient records of the purchase.

Second-hand goods are commonly defined as goods previously used and paid for by someone else. In the context of GST, second-hand goods don’t include:

  • new goods
  • primary produce – unless previously used
  • goods supplied under a lease or rental agreement
  • livestock
  • goods which contain gold, silver or platinum in any degree of purity.
  • Second-hand goods purchased from an associated person

When purchasing second-hand goods from associated people, the GST credit you can claim is treated differently.  I will not worry about this aspect but please be aware that an associated person can include:

  • companies controlled by the same persons
  • companies and persons with a 25% or greater interest in the company
  • partnerships, partners and associates of partners
  • relatives by blood, marriage or adoption, to the second degree (including people in a de facto relationship)
  • trustees of a trust and persons who have benefited or are eligible to benefit under the trust
  • trustees and the settlor of a trust, except where the trustee is a charitable or non-profit body
  • trustees of two trusts that have a common settlor
  • two persons who are each associated with a third person.

 Record keeping

If you purchase second-hand goods from someone who isn’t GST registered, you won’t be given a tax invoice to support your GST claim. In this case you must record the:

  • name and address of the supplier
  • date of purchase
  • description of the goods
  • quantity of goods
  • price paid.

GOODS AND SERVICES TAX – LOTTERIES, RAFFLES, SWEEPSTAKES AND PRIZE COMPETITIONS

Question

  1. What are the GST implications of conducting a lottery, raffle, sweepstake or prize competition?

Answer (Taken from an IRD document)

  1. A person who is GST registered (like the Methodist Church and all the parishes, synods and other entities within the group registration) need to account for GST on any lottery, raffle, sweepstake or prize competition they conduct.  This could include an unincorporated body or association (like a Parish or Synod).
  2. Overall, GST must be calculated on the amount paid by the participants in the lottery (money coming in), raffle, sweepstake or prize competition, less the amount of all prizes paid or payable in money (cash as a prize).
  3. For lotteries, raffles and sweepstakes, GST needs to be accounted for in the GST period that the drawing or determination of the result of the lottery, raffle or sweepstake is done.
  4. Input tax (the GST on the purchase of the goods and/or services) can be claimed for any GST component of the cost of goods or services that are purchased and used for the making of a taxable supply of the prize competition services.    The special deeming provision under s 20(3K) applies to non-profit bodies and ensures that a non-profit body can claim input tax an all goods and services that relate to non-exempt supplies.

Can a supplier claim an input tax deduction for non-cash prizes?

  1. If non-cash prizes in a lottery, raffle, sweepstake or prize competition are donated goods or services, then no input tax deduction is available to the supplier as no GST component was paid for the prize.

What are the practical implications for a person running a raffle, lottery, sweepstake or prize competition?

  1. Running a raffle, lottery, sweepstake or prize competition has a number of GST implications.
  2. In the case of the Methodist Church, which is registered for GST on a group basis, the raffle, lottery, sweepstake or prize competition is GST registered, the ticket or competition fee price includes GST, and GST will need to be paid on the value of the total amount of tickets sold or fees paid, less any cash prizes paid or payable. This may mean that you may need to have a separate chart of account code for lottery and raffle proceeds, to ensure that these funds are treated as being subject to GST, as opposed to other fundraising funds which may be treated as GST-exempt.
  3. Input tax credits may be claimed on costs associated with running a raffle, lottery, sweepstake or prize competition.

10. There may potentially be tax invoicing requirements (see s 24).  However, if the consideration for the supply does not exceed $50, a tax invoice is not required to be provided (s 24(5)).

Example

11. The following example explain the application of the GST provisions.

Fundraising raffle

12. The Sunnytown Parish is a Methodist Parish and is GST registered as it is part of the group registration of the Methodist Church.

13. As part of its annual fundraising the Parish runs a raffle, selling tickets for $2 each.  The raffle prizes include a family ferry voucher (donated by a ferry company), $100 cash, a massage voucher (donated by the local day-spa) and a basket of food items (purchased by the Parish and paid for in cash).  The raffle is drawn at the end of August 2014.

14. The raffle is a “lottery” and, therefore, “gambling” for the purposes of the GST Act.  The Parish, in conducting the raffle, is a supplier of gambling services for GST purposes.  As the Parish is GST registered, it must account for GST on this fundraiser.

15. The time of supply is the date at the end of August 2014 on which the raffle is drawn.  GST on the raffle must be accounted for in the GST return for the GST period in which that date falls (August 2014).

16. The consideration for the raffle is the total amount received from ticket sales, minus the $100 paid as a cash prize.  Input tax can be claimed for the grocery items purchased by the Parish.  No input tax can be claimed for the donated prizes (i.e., the ferry voucher and the massage voucher).

GST on Residential Accomodation

I have received a couple of e-mails from people asking about GST on rebuild costs associated with parsonages/ministers housing.  Residential accommodation is an exempt supply for GST purposes.

Without going into detail on the matter, GST is NOT charged on residential accommodation and therefore the GST included in the costs to maintain the residential accommodation, such as rates, power, phones, repairs and maintenance, capital costs, etc. are not able to be claimed backed on the GST return.

Residential accommodation is a “dwelling” which embraces premises occupied as a person’s principal place of residence.  The “person” does not have to be the owner of the property.  The term “person” is generic.