The Impact of New Zealand's Tax Legislation on the Platform Economy
In recent years, the rise of the platform economy, often referred to as the Gig economy, has transformed the way business transactions occur in New Zealand. These platforms connect buyers and sellers, facilitating a wide range of services and goods, from ride-sharing and accommodation rentals to tutoring and web graphic design. For the whole commentary see: Commentary on Taxation Bill
Next, we delve deeper into the new tax legislation that seeks to regulate this sector and its implications for businesspeople.
1. Enhanced Information Gathering
The primary objective of the newly introduced tax legislation is to enhance the Inland Revenue's access to information about sellers and their income within the platform economy. This move is a significant step toward improving tax compliance and transparency in this rapidly evolving sector.
2. Introduction of GST on "Listed Services"
One of the major changes in the legislation is the imposition of Goods and Services Tax (GST) on what is referred to as "listed services." These services encompass various categories, including:
Accommodation Services: Platforms like Airbnb will now be subject to GST.
Personal Services: This category covers a wide range of services, such as ride-sharing, tutoring, gardening, and web graphic design.
Transport Services: Popular services like Uber Eats and vehicle rentals will also fall under the GST regime.
3. GST Collection by Platform Operators
A significant aspect of the new legislation is the responsibility placed on platform operators to collect 15% GST on all sales conducted through their platforms. This applies regardless of whether the seller is required to register for GST. This means that the platform operator becomes responsible for collecting and remitting the GST to Inland Revenue.
4. GST Registration for Non-Resident Suppliers
Non-resident suppliers will be required to register for GST if their supplies exceed or are expected to exceed $60,000 in a 12-month period.
5. Information Collection Requirements
Starting from January 1, 2024, platform operators must collect specific information from sellers. This includes their name, date of birth, address, tax file number, and tax residence based on address information provided by the seller. However, it's important to note that this detailed information requirement applies primarily to foreign residents. Failure by a foreign resident to provide this information can result in a $1000 fine.
6. Impact on GST for Platform Operators
Platform operators will now be required to account for GST on the listed services provided through their platforms. This means they will collect and remit GST on behalf of the underlying supplier, regardless of the supplier's GST registration status. For example, a transportation service provider would claim GST on expenses like vehicle fuel.
7. Zero-Rated Income for Sellers
The income received by a seller from a platform operator is considered zero-rated because GST has already been collected and accounted for by the operator to Inland Revenue. For instance, if a tutor charges $40, the platform operator collects $40 plus GST. Since the operator has paid the GST on the $40, the tutor doesn't need to declare and pay GST output tax again.
8. The Flat Rate Credit Scheme
Suppliers who are not registered for GST will be eligible for an input tax deduction of 8.5%. This means that while platform operators collect GST at the rate of 15%, they will only account for 6.5% with Inland Revenue. This ensures that suppliers who aren't GST-registered can benefit from this tax relief.
9. Disclosure of GST Registration Status
To facilitate the flat rate credit scheme, the Commissioner will have the authority to disclose a person's GST registration status to marketplace operators. This will ensure the smooth operation of the scheme while allowing marketplace operators to continue applying existing GST rules for their facilitation services.
In conclusion, the new tax legislation significantly impacts the platform economy in New Zealand. It introduces GST on listed services, places responsibilities on platform operators, and establishes a flat rate credit scheme for suppliers.
Disclaimer:
The information provided in this blog post, "Navigating New Zealand's Platform Economy Tax Changes," is intended for general informational purposes only and should not be construed as professional accounting or tax advice.
While we strive to provide accurate and up-to-date information, tax laws and regulations are subject to change, and the application of tax laws can vary depending on individual circumstances.
Readers are advised to consult with a qualified and experienced accountant or tax professional for personalised advice tailored to their specific financial situation and business needs. Any reliance on the information presented in this blog post is at your own risk, and we disclaim any liability for any actions taken based on the information provided herein.