September 2023 Snippets

GST Registration checks

A standard data policing check completed by Inland Revenue is to review taxpayer GST filing patterns to identify taxpayers that are GST registered, but perhaps shouldn’t be.

In order to qualify for GST registration, a taxpayer needs to be conducting a “taxable activity”. This comprises a continuous or regular activity that involves making a supply of goods or services for consideration. This is a different test to whether a person is operating a “business” for income tax purposes, as it does not require an intention to make a profit.

A person is required to register for GST when the value of their sales exceed or are expected to exceed $60,000 in a 12-month period. But this issue is not about sales volume, because a taxpayer can voluntarily register for GST if sales are below this threshold.

The issue is whether the activity has stagnated to the point there is either no or very low activity levels, or sales have declined to the point where it suggests the activity has stagnated.

On deregistration, assets retained are deemed to be sold, which can give rise to a cash cost. But if reviewed by Inland Revenue there is a risk they may determine the GST registration should be cancelled at a past date or that the entity never qualified for GST registration – thereby requiring past GST refunds to be paid back. Knowing that a ‘knock on the door’ might be coming, it is worthwhile to pre-emptively consider whether an entity you are responsible for should not be GST registered.

Super profits

Last year, the Green Party hit the headlines for suggesting banks, fuel companies, supermarkets, building products suppliers and energy generators/retailers should pay tax on super profits. So, as we go into the election, we should give some thought as to whether some new innovative taxes are warranted.

For example, in Canada, kids cereal manufacturers have tax exempt status if their cereal contains a free toy. California was the first US State back in 1991 to apply California State Income Tax to out-of-State athletes that played in California, colloquially known as "jock tax". Today, over half of the US States have a jock tax. To protect the over harvestation of blueberries, the US state of Maine charges a small tax per pound of blueberries harvested.

So, if we had the opportunity, what would we do….
• Do we provide the All Blacks and Black Ferns a personal tax rebate each time they win, or do we increase their tax rate when they lose.
• Should politicians get taxed each time they don’t give a clear concise answer – a maximum percentage might be needed for that one.
• Tax fast food vendors each time they forget part of an order.
• Tax weather forecasters each time it rains on a predicted 'sunny' day.
• Tax cars that speed up in passing lanes.

The ideas are endless..