Inland Revenue’s latest changes to New Zealand’s GST rules will certainly impact on Australian businesses who transact with New Zealand customers via the Internet.
The rules come into play from 1 October 2016 and impact on Australian businesses who provide any sort of online service to customers who reside in New Zealand.
These changes are to get around the “Netflix” problem where concern has been expressed in New Zealand (as it has here in Australia) that nasty foreigners are able to stream all sorts of content GST-free leaving the local suppliers out of pocket.
Although the targeted services include online gaming, gambling, video streaming and music streaming services, it is clear from the legislation that any digital product being delivered to customers who are physically in New Zealand will be subject to the new rules.
Threshold for GST
That means that you will be required to charge New Zealand GST (currently 15%) and account for this tax to Inland Revenue if your sales to New Zealand customers over the last 12 months exceeded NZD$60,000 OR if you reasonably expect your sales over the next 12 months to exceed that sum. By “customers” they are referring to customers who aren’t registered for New Zealand GST and are using your product as part of their taxable activity.
Exemption from registering for GST
GST may not be charged to a New Zealand GST-registered business if it is buying goods that form part of its taxable activity.
A practical example of this exemption would be an Australian organisation that provides online training to NZ businesses. If the NZ business is registered for GST and the product is part of their activity, these sales wouldn’t be subject to GST nor included in the $60,000 threshold. If providing supplies to other non-registered New Zealanders didn’t exceed $60,000, there will be no need to register and account for GST.
Australian businesses should treat a New Zealand based customer as not being a GST-registered business unless that customer has notified them that they are registered for GST or if they have provided the supplier with their GST number or their New Zealand business number (NZBN).
A tricky problem – It might be hard to do the right thing and actually register for GST!
Perhaps the biggest catch of all is that the change to the anti-money laundering legislation in New Zealand late last year means that, in order to get the IRD number which is the equivalent of Australia’s ABN when it comes to GST collection, IRD need to be certain that you have been checked out.
And the only way of proving that to Inland Revenue is by proving you have a New Zealand bank account.
That’s because banks are required to carry our certain checks before they issue account numbers.
Chances are, most small Australian businesses transacting business in New Zealand using the Internet as a means of delivery are probably being paid through PayPal or credit card merchant services. Therefore, they are unlikely to have a New Zealand bank account.
Unless you have a cosy relationship with your Australian bank and they have some sort of representation over there, to get one can mean a trip across the ditch to present yourself in person at a New Zealand bank.
How do you tell if the customer is in New Zealand?
They’ll be regarded as a New Zealand customer if two of these check out:
- The persons billing address;
- The IP address;
- Bank or credit card details;
- Country code of the phone number;
- or anything else!
nztax.com.au is here to help with all New Zealand tax matters for small businesses.
The information in this article is indicative of NZ tax rules and changes and not intended to be complete for all intents or purposes and does not constitute advice. It is recommended that you obtain professional advice, suited to your particular circumstances, from us before acting on anything you read.