Goods and Services Amendment Act 1988

This commentary item was published in Public Information Bulletin Volume 173, April 1988

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Cancellation of Registration 1.4.88 to 30.9.88

An amendment to the Goods and Services Tax Act 1985 Section 5(3A) has created conditions that are more favourable for some non-profit bodies and voluntary registered persons who may wish to leave the GST System.

Current law provides that;

1. Cancellation of registration is available to:
   1. persons who cease all taxable activities and who have reasonable grounds for believing that they will not conduct any taxable activity within the following 12 months.
   2. persons who satisfy the Inland Revenue that in the following 12 month period they will not make taxable supplies exceeding $24,000.
2. Immediately prior to cessation, a registered person retaining assets of the taxable activity, needs to account for GST on those assets, regardless of whether they were acquired or produced before or after 1 October 1986. GST is calculated as one eleventh of the lessor of;
3. 1. the cost of those assets
   2. the open market value of those assets

This will show as a Box 5 adjustment in the final return.

So long as the above conditions are met then the amending provisions may be further considered. These apply to:

1. Those persons who registered on a voluntary basis and who at no time during their period of registration made taxable supplies exceeding $24,000 in any 12 month period.
2. Non-Profit Bodies

who apply in writing to the Inland Revenue Department between 1 April 1988 and 30 September 1988 for cancellation of registration. Such persons may claim an imputed credit (1/11th) on assets retained which were acquired or produced prior to 1 October 1986.

This claim may be made in the final return as a Box 8 adjustment and will be the lesser of:

1. the costs of goods and services to the supplier as at 30 September 1986
2. the open market value of those goods and services as at the date of the deemed supply.

The Department is issuing letters to all registered persons who voluntarily registered and has prepared an explanatory pamphlet on these new provisions which is available from any Inland Revenue Office.