COVID-19 is having a serious impact on New Zealand businesses in many ways. These include potential GST implications if supplies have been cancelled or there is a change in the use of an asset.
GST On Cancelled Supplies
- If GST is returned on a supply that is subsequently cancelled, a GST adjustment will be required in the period in which the reimbursement was made.
- If a tax invoice was raised for the supply, a credit note will also need to be raised.
- If a claim has been made for loss-of-income insurance (or similar) where the cancellation was significant or multiple supplies, any subsequent insurance pay-out will be subject to GST.
GST Adjustments For Change In Asset Use
- If an asset is not used for a period of time, for example during the COVID-19 Alert Level 4 lock down, there are unlikely to be any change of use or apportionment adjustments required for GST purposes.
- Where an asset such as a vehicle is used for both business and private use, IRD will apply a practical approach to accepting adjustment calculations due to the fact that the vehicle could not be used for normal business during Alert Level 4.
GST Registration Cancellations
- If a business closes down due to COVID-19, it may need to de-register from GST.
- Where a taxable activity has ceased and de-registration is appropriate, de-registration adjustments will be required to return GST on any assets retained from the activity.
Please contact us if you have questions regarding the implications of COVID-19 on your GST activities.