Goods and Services Tax law to change

Two significant GST changes that will affect your financing business come into effect in January 2005.

The first amendment provides an opportunity for you to recover more GST on your costs, as it allows GST to be recovered on costs associated with providing finance to businesses. Although there will be some compliance costs, we expect that the benefits will generally greatly outweigh these costs.

The second will impose a new GST cost if certain payments are made to overseas service providers. This amendment may require you to pay GST directly to Inland Revenue in addition to the payment you make to an overseas service provider. For borrowers, a typical example might be management fees paid to an overseas associate. In the past, such fees have not been subject to GST but this will no longer be the case.

All new and existing contracts need to be reviewed to ensure that they cater properly for these changes. There are also transitional rules that will affect contracts that span the 1 January implementation date.

We will circulate shortly to all readers of Financial Services Quarterly a more detailed description of the changes, how they will affect borrowers and lenders, and what you need to do before 1 January to ensure that you are adequately prepared.

If you have any queries, you should contact:

Auckland

Willy Sussman
Partner

Enquiries and information

For more information on any of the cases, articles and features in Financial Services Quarterly, please email Rachel Gowing or call on 64 9 916 8825.