Commissioner’s operational position on professional directors and board members incorrectly registered for GST
The Commissioner has released three Public Rulings concerning the GST treatment of fees paid to directors and board members:
- BR Pub 23/01 “Goods and Services Tax – Directors’ Fees”;
- BR Pub 23/02 “Goods and Services Tax – Fees of Board Members not appointed by the Governor-General or Governor-General in Council”; and
- BR Pub 23/03 “Goods and Services Tax – Fees of Board Members appointed by the Governor-General or Governor-General in Council”.
This Operational Position gives guidance on how these rulings will be applied.
In the Commentary to public ruling BR Pub 23/01 “Goods and Services Tax – Directors’ Fees” the Commissioner has expanded on the view taken in the previous equivalent ruling (BR Pub 15/10 “Goods and Services Tax – directors’ fees”) and concluded that a person who provides only directorship services is not eligible to be registered for GST. (A similar treatment applies to board members covered by public ruling BR Pub 23/02 “Goods and Services Tax – Fees of Board Members not appointed by the Governor-General or Governor-General in Council”.) While this treatment of professional directors and board members is not a change in the Commissioner’s view it is the first time that this view has been published in respect of this issue.
The Commissioner is aware that some professional directors1 are registered for GST, having incorrectly taken the view that they are carrying on a taxable activity. The Commissioner will not require these taxpayers to retrospectively deregister. However, those professional directors who are not carrying on a taxable activity must deregister with effect from 30 June 2023, or such other date as may be determined by the Commissioner.
On deregistration a taxpayer may be required to return GST on the market value of any goods and services that they retain that had form part of their taxable activity (s 5(3) of the Goods and Services Tax Act 1985).
Professional directors who may be affected by BR Pub 23/01 “Goods and Services Tax – Directors’ Fees” will likely come within one of the following categories:
- Professional directors who are registered but should never have been registered. This group includes people who never had a separate taxable activity (consulting activity, law practice, accounting practice etc) but notwithstanding this were registered for GST.
- Professional directors who are registered and were appropriately registered at that time because they carried on a separate taxable activity aside from their directorships but who have subsequently ceased to carry on that other activity and whose only “taxable supplies” are from their directorship fees and so should now be deregistered.
- Professional directors who are registered and were appropriately registered at that time because they carried on a separate taxable activity under which they included their directorship income, and who still carry on that separate taxable activity. This group can continue to remain registered for GST and continue to operate on that basis. However, if the turnover of their “non-directorship income” falls below the registration threshold they may choose to deregister consistent with category 2 above.
This operational position does not apply to professional directors who are registered and were appropriately registered at that time because they carried on a taxable activity separate to their directorships (for example, as an accountant), and who still carry on a separate taxable activity (whether above or below the registration threshold) and wish to remain registered for GST.
Any professional director who should be deregistered because of the Commissioner’s interpretation (or who wishes to deregister based on category 3 above) should utilise the “cancel your GST registration” process in myIR or complete an IR315 business cessation form.
Any professional director who wishes to discuss their situation with Inland Revenue should send a web message through myIR by first selecting “GST” as the subject from the drop-down menu, and then referencing BR Pub 23/01 to enable analytics to identify these messages. Please outline in the web message the circumstances you would like to discuss.
1 References in this Operational Position to professional directors should also be treated as applying to board members in an equivalent position under BR Pub 23/02.
BR Pub 23/01 - 23/03 - Goods and Services Tax – Directors’ Fees
BR Pub 23/01 - 23/03 FS - GST - Directors' feed and board members' fees (fact sheet)