There have not been significant changes to legislation for invoicing and documentation since GST was introduced in 1985, in contrast to the vast improvements to technology and business systems. In the Bill, Inland Revenue seeks to remove requirements for documentation rules that were originally based on paper based records, allowing for more flexibility in the way that the required GST information is shared between suppliers and their customers.

The proposed changes will not mean that business will have to stop using their existing systems, as the information required in the proposals often does not change significantly, rather the proposals are intended to provide business with more flexibility in an increasing digital world.

The required information to be held in finance systems will (at this stage) be known as supply information and taxable supply information, so no more GST Tax Invoices. In order to claim GST input tax credits you will need to hold the applicable taxable supply information, similar to the current tax invoice requirements.

The threshold for GST supply information under $50 will increase to $200 and there will no longer be the simplified invoice requirements for sales between $50 - $1,000. However, there is not yet any specific confirmation on the ability for purchasers to make claims of GST for purchases under $200 without detailed supporting GST information. This is an area that will require some further work, as is the one-size fits all approach for all supplies over $200 – there are many instances where there is no current process for the supplier to record the name and address of the recipient.

The current overly technical credit or debit note rules will be simplified and when correcting supply information, the only test will be that the original information was incorrect.

It will no longer be necessary to issue credit or debit notes or print “copy only” on duplicate invoices, but currently there is a requirement in the Bill to keep a record of requests for replacement information from customers. This register is one element that will need to be removed if the legislation is to be workable in a practical digital environment.

One significant improvement in the Bill is that businesses wanting to issue buyer-created tax invoices would no longer need prior approval from Inland Revenue. There would still need to be an agreement that only the recipient would create taxable supply information.

In some situations, it can make sense for a shared tax invoice to be issued for a number of supplies by different businesses supplying the same customer. This is one area where the intention of the proposed changes is positive, but the details currently have issues. Significantly, the proposed requirement for joint and several liability is not something that is likely to work well in practice. We suggest that there are other ways that the desired intention could be obtained.

There are also changes to the current offence of issuing multiple tax invoices, with the Bill proposing to create a strict liability offence for the recipient to claim multiple input tax deductions for the same supply.

It is important to note that these changes to taxable periods after the date of enactment (expected to be March 2022) and that current legislation will apply up until then. We strongly recommend that businesses familiarise themselves with the proposals.

The GST grouping rules are designed to prevent distortions arising from intra-group supplies and reduce compliance costs for companies who are part of the same group. Under the proposed changes there will be more legislative certainty for the treatment of GST groups.

In particular, the legislation will be explicitly clear that: the GST group would effectively be a single registered person for the purposes of carrying on their activities and for supplies to third parties; there would be no requirement for members to return intra-group supplies; each member will have joint and several liability; and a nominated member company’s IRD number could be used for every member’s invoicing. Group members can join either at the start of the GST period or when the company is registered. This means that part period returns from members who are yet to join a group are no longer required.

There have been no changes to the eligibility requirements to form a GST group.

It is proposed that when a company leaves the GST group, Inland Revenue could allow the joint and several liability obligation to be suspended for the departing company. This is a great improvement and will simplify many business sales; it effectively adopts the same position that can be taken for income tax purposes when a company exits a consolidated tax group. Some changes will be needed to the detail of this proposed rule, but it is a great first step.

Second-hand input tax credits and associated persons – a positive change

Often when starting a property development project a person may initially purchase a commercial property in their own name and then subsequently sell the property to their associated company once it has been registered. Currently the GST legislation prevents people being able to claim any input tax credit on the purchase, due to the way the associated persons rules work if the original non-associated vendor was not GST registered.

Under the new Bill, GST input tax would be able to be claimed by an associated party capped at the GST tax fraction of the most recent sale from a non-associated party before the second-hand goods was purchased by associated party.

This is a positive development as anti-avoidance associated persons legislation has arguably been “working” too well in many situations and people have missed out on receiving significant GST refunds which should have been available from a GST policy perspective.