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How come businesses and non-profit organisations can claim back GST, but individuals can't on their purchases, especially petrol and food? How much more revenue would be available to the government if GST wasn't claimed back by businesses/non-profit organisations? And would any political party be brave to introduce it?
I spoke to Alan Bullot, Deloitte's GST expert about this.
He says the fact that businesses charging GST on their goods and services can claim a refund on the GST they pay on things they buy for the business is a "feature not a bug" of the way the system is designed.
Alan Bullot, a GST specialist and partner at Deloitte.
Supplied / Deloitte
"It's not supposed to be a cost to businesses, they are merely the means with which Government collects it. And if you had GST as not being able to be claimed back by businesses, they would have to put their costs up for everything that they sell.
"They would have a significant additional cost, unless the government then wanted to look to decrease the rate of GST to try and manage it … because it would be collecting lots more tax, but it would be a fundamental change.
"If you did not allow businesses to claim back GST, you would be putting a significant additional cost on businesses. It is designed to be a tax on private consumption in New Zealand."
He said small businesses in particular were looked at closely to make sure that private expenditure was not being put through the business books to claim back GST. "That is something that does get reviewed by Inland Revenue and is an area that does get more focus. It's particularly in small business because in larger businesses you've got a bunch of other controls and policies in place … but if you're a one-person operator IRD does have to be careful that you're not putting your domestic shopping for your food through as the office coffee and tea."
I'm wondering why NZ banks do not accept Chinese Yuan, despite China being our biggest export market by a big margin. Is it common, or even good practice to ask your customer to pay in other currencies, such as USD? Who should bear the risk of exchange rate fluctuations? This is also in the light that as a country, we encourage trading with China.
Assoc. Prof. Claire Matthews, Massey Business School
Supplied/Massey University
Claire Matthews, a banking expert at Massey University says it does seem as though the big four banks don't facilitate payments in Chinese Yuan.
"I don't think the banks do anything in respect of foreign cash these days for any currency. I don't think they can stop you receiving payments in Chinese Yuan, but they will convert it on arrival because they can only hold funds in currencies they deal with.
"It is normal for banks to only deal with some currencies. To be able to offer services in another currency, banks have to have correspondent banking relationships. I suspect that establishing these relationships with banks in China may be more difficult than with some other countries.
"With respect to trading - the fact that the trading is taking place with a Chinese company does not mean it is denominated in Chinese Yuan for a variety of reasons."
I have a question regarding accounting services offering 'add-on' tax audit insurance. We are an Auckland couple who moved to another city for a while, during which time we rented out our (only) house and took a rental in the city we had moved to for the roughly three-year period we were away. We are now back in our house in Auckland … our accountants sent us an email offering 'Audit Shield' insurance to cover professional fees in the event of an audit by IRD. It was exactly because we wanted our tax calculated correctly to minimise risk of such things as audits or other hassle that we engaged the accountants and we suspect the insurance might be akin to some sort of unneeded 'extended warranty' they are attempting to upsell to us. Moreover - they appear to want us to sign a document stating we do not want insurance and send it back to them. We would have expected that the use of their services, and the relative lack of complexity and low numbers involved in our situation make us unlikely targets for an audit. Is this naive? If we do buy the extra cover - will it be for just this year and therefore no use if we are audited in future years?
Many accountants offer audit insurance, which helps to cover the cost of being audited.
There are usually some pretty significant accountants' fees involved in that process, so it can provide some protection against that at relatively low cost.
You are correct that you do seem to be low risk, though.
Chartered Accountants Australia New Zealand lead John Cuthbertson.
Supplied / Chartered Accountants Australia New Zealand
Chartered Accountants Australia New Zealand spokesperson John Cuthbertson was pretty sceptical about whether you need it.
He said there was always a risk that you could be selected for a random audit but it would seem unlikely. Inland Revenue can go back four years to look into any returns that have been filed.
"You'd normally expect us to get one or two questions," he said.
"This audit insurance coverage is generally for professional fees to assist, answer any queries and the time and cost involved with that. And, you know, if it was to go further in terms of a formal dispute, then in terms of assistance with preparing the notice of response to the notice of proposed adjustment. So it's the cost, time and cost.
"The person's right. You'd normally expect to see that more in terms of someone that has more complex tax affairs ... for a business scenario, it can be quite costly in terms of time taken out of the business."
Audit insurance applies per year.
If your accountant has made errors, I would expect them to address those for you without charge.
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