Articles by Matthew Gilligan
In June 2008 the Government released a tax policy issues paper for public consultation that looked at options for reducing risks that GST can present to both businesses and the Government. Following submissions in relation to this, the Government has now released a follow up discussion document that reinforces many of the proposals initially made but with one notable omission.
One of the most controversial elements of the original June 2008 issues paper was the proposed denial of GST input claims on the purchase of land from unregistered vendors. In short, the original issues paper proposed that no GST should be able to claimed when a GST registered buyer buys land from an unregistered person. The rationale was that there are different tests for transactions between associated and unassociated persons. In the case of associated vendors and purchasers, no GST can be claimed when an unregistered vendor sells to a registered purchaser. Rather than having two different tests, the issues paper suggested that the associated persons test should be extended to unassociated transactions. Needless to say this would have had a dramatic impact on taxpayers engaged in property dealing in development activity where often stock is purchased from unregistered parties.
Fortunately the new discussion document makes no mention of such a rule so it seems to have fallen by the wayside.
Some of the proposed changes that have survived though include the following:
On balance we think that the proposals are generally sensible. We note that we are of course just at discussion document stage at this point. Next step from here is another round of public submissions which close on 18 December 2009. From there one would expect draft legislation to be introduced to Parliament to be followed by the Select Committee stage, which involves a further round of public submissions before final legislation is enacted and implemented. If you are concerned about the potential impact of any of these proposed tax rules changes on your affairs, contact us at GRA.
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