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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:

“Rules for GST deductions and how they affect your taxes”

You can’t get a deduction for input tax on goods or services you buy, or for GST you have to pay to the Commissioner.

You can get a deduction for deductible output tax, but only if you’re allowed a deduction for the money you spend to buy or make the goods or services, or if you’re allowed a deduction for how much the goods or services have gone down in value.

If you’re not registered for GST but you supply certain services, you’re treated as if you were registered when it comes to deductions for expenses related to those services.

The rule about deductions for deductible output tax doesn’t apply when you’re adjusting the value of a big item you use in your business.

There are special rules about how to work out the cost of an item that can lose value over time when GST is involved. You can find these rules in section EE 54.

This section works with subpart DA in two ways. First, it stops you from getting a deduction in some cases even if you would normally be allowed one. Second, it gives you an extra way to get a deduction, but you still have to follow the general rules about what you can’t deduct.

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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.

Topics:
Money and consumer rights > Taxes
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DB 1: Taxes, other than GST, and penalties, or

“Certain taxes and penalties cannot be claimed as deductions”

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DB 3: Determining tax liabilities, or

“How to claim tax deductions for costs related to managing your tax affairs”

Part D Deductions
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. 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.

          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(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(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 taxable supply: repealed, on , by section 37(4)(b) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).