A GST-registered person who purchases “second-hand goods” in the course of a taxable activity may be able to deduct a proportion of the purchase price as input tax.

A deduction may only be made if:
  • The goods are purchased for making taxable supplies;
  • The goods are in New Zealand;
  • The supply is a non-taxable supply, for example, an exempt supply or one made by a person not registered for GST;
  • The supply is by way of sale; and
  • Payment in respect of supplies after 21 March 1989 has been made during the relevant taxable period.

Therefore it is not sufficient if, for example, the GST-registered person leases the goods or receives them debt-free via an in specie distribution. Note that payment must actually be made.

A deduction will not be available if:
  • The purchaser or another GST-registered person has previously claimed an input tax credit for Customs GST levied on the importation of goods. The restriction on claiming the second-hand goods credit applies to goods purchased after 21 June 1995 and goods purchased before that date if a GST return had not yet been filed for that period.
  • A non-resident owner who sells the goods to a GST-registered person in New Zealand is not the same person who originally leased the goods to a registered person in New Zealand (from 14 September 2011).
  • The purchase is associated to the seller and the seller paid no GST on the goods when they acquired them.
Important things to note:
  • Full particulars of the purchase must be kept if the deduction is claimed.
  • In the case of IR disputing the credit, the onus of proof is on the person claiming it.
  • A seller might wish to take a purchaser’s ability to claim the credit into account when setting the sale price.

Please note that the above information is only intended as a general guide. Please contact us to discuss your particular circumstances.