New Zealand’s GST rules which have allowed Australian businesses to send low value consignments to customers in New Zealand without having to account for New Zealand GST, are about to change.
Under the current rules, New Zealand Customs do not charge New Zealand GST on goods imported into New Zealand if the value of those goods is less than NZ$400.
That is because the GST to be collected will be less than $60 which hasn’t been regarded as economic. When goods with a value of more than $400 are imported, New Zealand Customs will apply New Zealand GST at the rate of 15%.
With the growth of e-commerce the volume and value of imported goods on which New Zealand GST is not being collected has become significant and the New Zealand government is bringing in new rules to address this “tax leakage”. This tax leakage is estimated to be around $130 million per annum and increasing. There are also political concerns because it puts New Zealand retailers at a competitive disadvantage compared to Australian suppliers.
To address this concern New Zealand will be introducing new rules which are likely to have an impact on most Australian businesses wanting to send product to New Zealand.
With regard to product sent to New Zealand from Australia valued at less than $1000, New Zealand Customs will stop collecting GST (with the exception of tobacco products or alcoholic beverages). Australian businesses who are sending product to New Zealand businesses, when those customers are themselves registered for New Zealand GST, won’t be affected by these changes.
That is because the New Zealand business would simply claim any GST back which would result in no benefit for the taxman but another layer of compliance. There are some exceptions to this rule. If an Australian business sends product to a New Zealand business which the supplier decides would be zero-rated for New Zealand GST purposes, the supplier would be able to claim back any New Zealand GST costs. This is a technical area and you should contact us for advice if you think this relates to you.
However, if you are selling product to New Zealand consumers in orders of less than NZ$1,000, then you are likely to be impacted by these changes.
If your send product to New Zealand in these smaller consignments and the total sales of product to New Zealand consumers exceeds NZ$60,000 in a 12 month period, you will be required to register and account for New Zealand GST at the standard New Zealand GST rate of 15%.
These rules bring New Zealand into line with equivalent rules Australia introduced on 1 July 2018 to level the playing field for Australian businesses who were being unfairly disadvantaged by overseas companies sending product to Australian consumers without having to account for Australian GST.
Australian businesses need to have systems in place
You will need to have systems in place that allow you to determine the value of sales to New Zealand consumers. A key determinant would be the address the product is ultimately delivered to.
You will be required to presume that a New Zealand customer is not a GST registered business unless they provide you with their GST registration number or proof of registration.
If you accidentally charge a New Zealand GST registered business New Zealand GST, that business will be expecting you to refund that GST amount. They will not be claiming it on their GST return unless you provide them with a GST tax invoice that meets New Zealand GST requirements.
Inland Revenue has also advised that they will be introducing a simplified “pay-only” registration system that will apply if an Australian business is only required to remit GST collected on sales under these rules and do not have any New Zealand GST costs to claim back. This will help circumvent the significant hurdles involved in non-residents obtaining New Zealand tax registration that have come about as a result of New Zealand’s Anti-Money Laundering and Counterterrorism Financing legislation.
Unlike New Zealand standard GST reporting rules, Australian suppliers who are returning GST under these new rules will be accounting for GST on a quarterly basis. This will help tie in nicely with Australian BAS returns.
Commencement date
These new rules were to be introduced on 1 October 2019. The New Zealand government has now advised, through Inland Revenue, that the commencement date will be 1 December 2019 in order to give offshore firms such as Australia.
We are here to help on 1300 791 600.
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.