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Inland Revenue has issued a GST policy directive which may impact on Australian companies who are involved in building activity within New Zealand.

There have been cases when New Zealand entities have been completing building and construction projects in New Zealand on behalf of an overseas customer.

Sometimes the situation is that an Australian company has secured a contract to build in New Zealand and have engaged a New Zealand company to manage and perform the contract on their behalf. The New Zealand entity has sourced materials, tools, equipment and contractors and claimed the GST content on those supplies.

When raising an invoice to the Australian company, the transaction has been treated as an export on the grounds that the customer is based overseas.

When it comes to the GST treatment of transactions related to land (including constructing things on that land), Inland Revenue has determined that:

  • When that that land is situated outside of New Zealand, the transaction will be regarded as an export and zero rated for GST purposes.
  • When that land is situated inside New Zealand it will be regarded as a domestic transaction and subject to GST (currently 15%).

Of course, if the customer is running a taxable activity in New Zealand and is registered for New Zealand GST, they will be able to claim this GST back on the New Zealand GST return.

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.