SMALL BUSINESS RESOURCES

Taxable & supplies exempt from GST

In New Zealand, GST taxable supplies sold under taxable activity must attract a 15% GST payment to the IRD, but there are some exemptions from GST under a small range of circumstances.

If you sell goods and services that are tax-exempt, you don’t need to charge GST in your transactions. You also can’t claim GST in your returns, so input tax is not applicable.

Be careful in this process, as generating accurate GST returns and paying GST you owe are serious undertakings and the Inland Revenue Department (IRD) doesn’t take them lightly.

What is a taxable supply?

What exactly is a taxable supply?

A GST taxable supply refers to the supplies (goods and services) your business provides while carrying out taxable activity. 

If you’re registered for GST, a taxable supply must include GST, which means you need to charge and pay GST on it. 

The GST of a taxable supply is charged at either 15% (standard-rated) or 0% (zero-rated).

As a business in New Zealand, you can only claim back the GST you’ve paid on your business-related purchases and expenses if you use those goods and services to make taxable supplies.

Zero rated supplies

What are zero rated supplies? Zero rated supplies are those which, under certain circumstances, attract 0% GST.

Zero rated supplies include:

  • certain exported services
  • certain imported services
  • duty free goods
  • exported goods and vessels
  • the initial sale of fine metals
  • temporary imports
  • online sales to international buyer
  • services performed outside of New Zealand
  • international carriage

What are GST exempt supplies?

There are a few categories where GST doesn’t apply to the supply of goods and services (or in certain circumstances, doesn’t apply). These are called GST exempt supplies. 

Any New Zealand business filing a GST return and charging GST should thoroughly understand GST exempt supplies. It needs to be a top priority.

 

GST exempt supplies are exactly as they sound – goods and services that don’t have any GST attached and no GST payment or claim can be made for them. 

What are exempt supplies?

Fine metals

The supply of fine metals by a dealer or similar is an exempt supply. The importation of fine metals is also GST exempt.

If, however, the fine metal is ‘new’ and is being sold from a refiner to a dealer it is termed a zero-rated supply and not GST exempt.

Fine metals are defined as:

  • gold with a fineness more than or equal to 99.5
  • silver with a fineness of more than or equal to 99.9%
  • platinum with a fineness more than or equal to 99%

Donated goods resold by non-profits

Goods that are donated to a charitable organisation cannot attract GST when resold. If expenses are incurred in the supply of donated goods, these too cannot attract a GST claim. For example, if a computer is donated to a church and that organisation sells the computer, no GST can be charged.

Financial services

In general, the supply of financial services is exempt from GST. There’s an exception in the B2B supply of financial services – these are zero rated.

GST exemptions include:

  • interest
  • loans and mortgages
  • bank fees
  • stocks and shares
  • currency exchange 

Renting a residential building or dwelling

If you rent a dwelling for residential purposes, you cannot claim GST on the rent. 

A landlord can also not claim GST on any expenses incurred by the dwelling such as maintenance, improvements, or insurance.

The sale of a property (during taxable activity) that was rented out for five years prior is also an exempt supply.

Penalty interest

If your debtor has unpaid bills that have attracted a penalty – this is GST exempt. Say an invoice you issued is overdue and there are penalties due – the GST on the original invoice is payable but the penalty interest is not.