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Income Tax Act 2007

Deductions - Specific rules for expenditure types

DB 2: Goods and services tax

You could also call this:

"Tax on things you buy and sell"

When you are a registered person, you cannot claim a deduction for some things. You cannot claim a deduction for the goods and services tax (GST) you pay to the Commissioner. You also cannot claim a deduction for input tax on goods or services supplied to you.

You can claim a deduction for deductible output tax, but only if you are allowed a deduction for the cost of acquiring or producing the goods or services. This also applies if you are allowed a deduction for depreciation loss on the goods or services. The rules about GST are in the Goods and Services Tax Act 1985, which defines what a flat-rate credit is.

If someone supplies you with goods or services and they are not registered, they are treated as if they were registered for the purposes of this rule. However, this does not apply if the supplier has received a flat-rate credit and has chosen to include it in their income. You can find more information about the cost of goods or services, including GST, in section EE 54. This section is linked to subpart DA, which has the general rules.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1513574.

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Part DDeductions
Specific rules for expenditure types

DB 2Goods and services tax

  1. A registered person is denied a deduction for the following:

  2. input tax on a supply of goods or services to them:
    1. a flat-rate credit, as defined in section 2(1) of the Goods and Services Tax Act 1985:
      1. goods and services tax (GST) payable by them to the Commissioner.

        1. A registered person is allowed a deduction for deductible output tax but only to the extent to which—

        2. they are allowed a deduction for expenditure that they incur in acquiring or producing the goods or services; or
          1. they are allowed a deduction for an amount of depreciation loss for the goods or services.

            1. For the purposes of subsections (1) and (2), an underlying supplier referred to in section 8C of the Goods and Services Tax Act 1985 who is not a registered person is treated as if they were a registered person for the purposes of this section in relation to a deduction for expenditure to the extent to which the expenditure is attributable to a supply of listed services. However, this subsection does not apply if the underlying supplier has received a flat-rate credit, as defined in section 2(1) of that Act, in an income year and has chosen as described in section CH 5B (Adjustments for certain flat-rate credits under platform economy rules) to include the amount of the credit in their income for the income year.

            2. Subsection (2) does not apply to an adjustment made in relation to a capital asset.

            3. The provisions that apply when an amount of depreciation loss is quantified by reference to the cost of an item of depreciable property to a person are in section EE 54 (Cost: GST).

            4. The link between this section and subpart DA (General rules) is as follows:

            5. subsection (1) overrides the general permission:
              1. subsection (2) supplements the general permission; the general limitations still apply.

                Compare
                Notes
                • Section DB 2(1)(ab): inserted (with effect on 1 April 2024), on , by section 38(1) (and see section 38(4) for application) of the Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 (2025 No 9).
                • Section DB 2(2): amended, on (applying to taxable supplies made on or after 1 April 2011), by section 37(2) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
                • Section DB 2(2): amended (with effect on 1 April 2008), on (applying for the 2008–09 and later income years), by section 37(1) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
                • Section DB 2(2): amended (with effect on 1 April 2008), on , by section 10 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
                • Section DB (2B) heading: inserted, on , by section 36 of the Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 (2023 No 5).
                • Section DB (2B): inserted, on , by section 36 of the Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 (2023 No 5).
                • Section DB 2(2B): amended (with effect on 1 April 2024), on , by section 38(2) (and see section 38(4) for application) of the Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 (2025 No 9).
                • Section DB 2(3): substituted, on (applying to taxable supplies made on or after 1 April 2011), by section 37(3) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
                • Section DB 2 list of defined terms deductible output tax: inserted, on , by section 37(4)(a) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
                • Section DB 2 list of defined terms income year: inserted (with effect on 1 April 2024), on , by section 38(3) of the Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 (2025 No 9).
                • Section DB 2 list of defined terms taxable supply: repealed, on , by section 37(4)(b) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).