Goods and Services Tax

Goodsand Services Tax

Tableof Contents

Introduction 3

Claim of GST Credit When the Supplier and Purchaser Aren’t Associated Persons 3

Claim of GST Credit When the Supplier and Purchaser Are Associated Persons 4

Record Keeping 4

Summary 5

References 6

Goodsand Services Tax (GST) is a form of indirect-valued tax in NewZealand. GST is charged on goods and services presented by aGST-registered person. Notably, GST is not a tax on the business buta tax charged at a certain rate to the buyer of goods and services.GST is governed by the Goods and Services Act (GSTA). If a businessis not GST-registered, it cannot claim or charge GST. In addition,some goods and services e.g. livestock, fine metal and rent fromdomestic accommodation are not included in GST. GST is taxed onsecond-hand goods. The ordinary meaning of a second hand good is acommodity that has been previously used and paid for by someone else.

Claimof GST Credit When the Supplier and Purchaser Aren’t AssociatedPersons

Sporadically,a GST registered person or business may purchase second hand goodsfrom a business or person that isn’t registered for GST. The goodnews is that the business can claim a GST credit on condition that:

    • The goods were located in New Zealand at the time of purchase and are supplied by its resident.

    • The business is registered for GST.

    • The purchase is not a taxable supply since the supplier is unregistered.

    • The principle purpose of the purchase is to make taxable supplies.

    • No input tax credit claim has been made in previous importation of the goods.

Inkeeping with GSTA, s 3A(3)(e), if the supplier and purchaser aren’tassociated persons, then an input tax for second-hand goods of threetwenty-thirds (3/23rds) is acquired on the supply.

Claimof GST Credit When the Supplier and Purchaser Are Associated Persons

Insituations where those purchasing second-hand goods are associatedpersons, the GST credit claim is treated differently. Notably,associated persons are those whose companies are controlled by thesame persons, are partners, relatives, trustees of the same trustthat have a common sector etc. In that situation, the amount of inputtax is the lowest of the following amounts:

      • The GST component (if any) of the original cost to the supplier

      • Three twenty-thirds of the purchase price

      • Three twenty-thirds of the open market value of the supply (GSTA, s 3A(3)(a)


Incase of a non-taxable supply, the supplier is unable to take a taxinvoice. Nonetheless, the purchaser can claim deduction of input taxfor the accredited GST as long as he/she keeps record of:

      • Name and address of the supplier

      • Date which second-hand goods were acquired.

      • Description of the supplied goods

      • Quantity or volume of goods supplied

      • Consideration of the supply

Accordingto GSTA, s 24, if the amount of the goods or service purchased isless than $50, the above details do not have to be kept but only arecord of the purchase.


Inaccordance with the Goods and Services Act (GSTA), a business orperson claim GST in its GST return as a second hand goods claim evenif it buys an asset from a person who is not GST registered. However,certain procedures e.g. recording and charge rates have to befollowed depending on whether the supplier and purchaser areassociated as stipulated in the presentation. Markedly, suchprocedures ensure the business’s claim of GST input tax whenselling the goods is considered legitimate.


Claus,I. (2014). GST Compliance in the New Zealand Property Sector. FiscalStudies,35(2),225-240.