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GST grouping guidance

April 2024 - Tax Alert

By Robyn Walker

Goods and Services Tax (GST) can be complex. Despite its svelte size in comparison to the Income Tax Act, the GST Act punches above its weight when it comes to complex legislation. However, amongst the complexities of our GST laws there are occasional treats, where pragmatic rules help taxpayers get to the right outcomes. GST grouping, is one such set of rules.

If you have a group of companies or other entities, consideration should always be given to whether forming a GST group can materially reduce compliance costs for your business. Having a GST group allows intra-group supplies to be disregarded, meaning that “special” rules which dictate the time and value of supply for transactions between associated persons can be ignored. Supplies are all deemed to be made to and from the representative member of the Group, so grouping can also solve technical issues when costs are incurred in the wrong entity or invoices are addressed to a different group member. GST grouping can also help multinational groups to claim back GST on costs when a non-resident visits New Zealand or undertakes some activity here.

Sounds great? Yes, it is. There are some however some further details to be aware of, and specific rules which determine who is able to form a GST group.

Fortunately, Inland Revenue have recently released comprehensive guidance on these rules.

Interpretation Statement 24/02 GST – Grouping for companies (51 pages) and Interpretation Statement 24/03 GST – Who can group register? (71 pages) are the new go-to guides for anything related to GST groups and provide some really useful examples and scenarios which explain how these rules work. While most interpretation statements focus solely on technical interpretations, these go further and also contain useful information about how to go about registering, what forms to complete and what to do with them.

Before immediately planning to form a GST group, it is important to note that all group members become joint and severally liable for the tax owing by the group. However, a recent law change now allows the Commissioner the discretion to excuse an existing group member from liability in certain circumstances.

For more information about how GST grouping could help your business, please contact your usual Deloitte advisor. 

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