A current tax Bill proposes not to require payments for goods or services up to $10,000 to be split between business and personal if the principal purpose of buying the goods or services is business.
For example, if a car is bought for $10,000 and it’s used principally for business, the whole amount is treated as an asset of the business. One hundred percent GST could be claimed without the need for a personal use adjustment.
If the car’s principal purpose is personal use (log book says private running more than 50%) the GST claim would be nil. Assuming it’s passed by Parliament, the changes will take effect from 1 April 2023.
Some people use their home for business as well. For example, they might run an Air B&B from the home and 20 percent might be for business. Under the proposed new rules, when they buy a house they could elect not to claim a share of the GST at the time of purchase and treat the whole house as personal so there would be no GST on sale. People who have already claimed GST but would now prefer they hadn’t will be allowed a transitional period of two years starting from 1 April 2023 to hand the GST back to Inland Revenue.
The changes are to be backdated to 1 April 2011.
