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Goods and Services Tax Act 1985

General provisions

78: Effect of imposition or alteration of tax

You could also call this:

"What happens to agreements when the government changes tax laws"

Illustration for Goods and Services Tax Act 1985

When the government changes the tax law, it can affect agreements you have with others. If a change in the law means you have to pay more tax, you can add the tax amount to the agreed price. If a change in the law means you have to pay less tax, you can subtract the tax amount from the agreed price.

If the government changes the tax law to make something taxable, or to increase the tax rate, any fees or charges related to that thing will also increase by the amount of tax. If the government changes the tax law to make something exempt from tax, or to decrease the tax rate, any fees or charges related to that thing will also decrease by the amount of tax.

If you pay too much money because of a change in the tax law, section 74A(1) of the Property Law Act 2007 applies, even if section 74A(2) of the Property Law Act 2007 says otherwise.

If a supply of goods or services becomes taxable, you can recover the amount of tax from the person you are supplying. This section does not apply to supplies of services that are treated as being made in New Zealand under section 8(4B).

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM85298.

Topics:
Money and consumer rights > Taxes
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Part 11General provisions

78Effect of imposition or alteration of tax

  1. For the purposes of this section the expression alteration in the law means the coming into force of the provisions of this Act or any amendment to this Act by which—

  2. a supply of goods and services is charged with, or exempted from, tax; or
    1. the rate of tax in relation to a supply of goods and services is increased or reduced.

      1. Where an alteration in the law is made and a supplier has, at any time entered into any agreement or contract in respect of the supply of goods and services with a recipient, unless express provision for the exclusion of any such alteration in the law is contained in the agreement or contract, every such agreement or contract shall be deemed to be modified as follows:

      2. where the alteration in the law renders that supply liable to be charged with tax or increases the amount of any tax charged or chargeable in relation to that supply, the supplier may add to the agreed price in the said agreement or contract the amount of that tax or the increase of that tax; or
        1. where the alteration in the law renders that supply exempt from tax or reduces the amount of tax charged or chargeable in relation to that supply, the supplier or the recipient may deduct from the agreed price in the said agreement or contract the amount of that tax or the reduction of that tax:
            1. provided that this subsection shall not apply where that contract or agreement is entered into after the expiry of the period of 3 months that commences with the coming into force of the alteration in the law: provided further that this subsection shall not apply to require a public authority to alter any amount agreed to be paid by the authority in respect of any supply of goods and services where the consideration for that supply is in the nature of a grant or subsidy.

          1. Where an alteration in the law is made, any fee, charge, or other amount, prescribed by, or determined pursuant to, any legislation, in respect of any supply of goods and services shall, unless provision to the contrary is contained in that Act or regulation, be deemed to be modified as follows:

          2. where the alteration in the law renders the fee, charge, or other amount prescribed by, or determined pursuant to, that legislation liable to be charged with tax or increases the amount of tax charged or chargeable, the said fee, charge, or other amount so prescribed or determined shall be increased by that amount of tax charged or chargeable; or
            1. where the alteration in the law renders the fee, charge, or other amount prescribed by, or determined pursuant to, that legislation exempt from tax or reduces the amount of tax charged or chargeable, the said fee, charge, or other amount so prescribed or determined shall be exempted from tax or reduced by the amount of tax no longer charged or chargeable:
                1. provided that where any such legislation prescribes or determines either a maximum or a minimum amount in respect of any supply of goods and services, that maximum or, as the case may be, minimum amount shall, for the purposes of any such legislation, be deemed to be increased or, as the case may be, decreased, by the amount of tax charged or, as the case may be, tax no longer charged by virtue of this subsection: provided further that this subsection shall not apply to any fee, charge, or other amount prescribed or determined which is required by virtue of that legislation to be paid by any public authority to any person other than a public authority.

              1. Where any alteration in the law takes place so as to operate retrospectively from any date, this section shall also apply retrospectively in the same manner and from the same date, and section 74A(1) of the Property Law Act 2007 shall apply to any money paid by a recipient to a supplier in excess of the amount which by virtue of the application of this section is properly payable in respect of that agreement, contract, or legislation, notwithstanding section 74A(2) of the Property Law Act 2007.

              2. Where any supply is or becomes charged with tax pursuant to this Act, the amount of any increase in consideration in respect of that supply attributable to the tax charged on that supply shall be recoverable by the supplier from the recipient of the taxable supply.

              3. This section does not apply to a supply of services that is treated by section 8(4B) as being made in New Zealand.

              Notes
              • Section 78(2): amended, on , by section 52 of the Taxation (Budget Measures) Act 2010 (2010 No 27).
              • Section 78(2): amended (with effect on 3 December 1985), on , by section 34(1)(a) of the Goods and Services Tax Amendment Act 1986 (1986 No 43).
              • Section 78(2) first proviso: substituted, on , by section 20 of the Finance Act 1989 (1989 No 13).
              • Section 78(2) second proviso: added, on , by section 20 of the Finance Act 1989 (1989 No 13).
              • Section 78(3): amended, on , by section 3 of the Secondary Legislation Act 2021 (2021 No 7).
              • Section 78(3): amended (with effect on 3 December 1985), on , by section 34(3)(a) of the Goods and Services Tax Amendment Act 1986 (1986 No 43).
              • Section 78(3) first proviso: added (with effect on 3 December 1985), on , by section 34(4) of the Goods and Services Tax Amendment Act 1986 (1986 No 43).
              • Section 78(3) first proviso: amended, on , by section 3 of the Secondary Legislation Act 2021 (2021 No 7).
              • Section 78(3) second proviso: added (with effect on 3 December 1985), on , by section 34(4) of the Goods and Services Tax Amendment Act 1986 (1986 No 43).
              • Section 78(3) second proviso: amended, on , by section 3 of the Secondary Legislation Act 2021 (2021 No 7).
              • Section 78(3) second proviso: amended (with effect on 1 October 2010), on , by section 22 of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
              • Section 78(3)(a): amended, on , by section 3 of the Secondary Legislation Act 2021 (2021 No 7).
              • Section 78(3)(a): amended (with effect on 3 December 1985), on , by section 34(3)(a) of the Goods and Services Tax Amendment Act 1986 (1986 No 43).
              • Section 78(3)(a): amended (with effect on 3 December 1985), on , by section 34(3)(b) of the Goods and Services Tax Amendment Act 1986 (1986 No 43).
              • Section 78(3)(b): amended, on , by section 3 of the Secondary Legislation Act 2021 (2021 No 7).
              • Section 78(3)(b): amended (with effect on 3 December 1985), on , by section 34(3)(a) of the Goods and Services Tax Amendment Act 1986 (1986 No 43).
              • Section 78(3)(b): amended (with effect on 3 December 1985), on , by section 34(3)(b) of the Goods and Services Tax Amendment Act 1986 (1986 No 43).
              • Section 78(4): amended, on , by section 3 of the Secondary Legislation Act 2021 (2021 No 7).
              • Section 78(4): amended, on , by section 183(b) of the Senior Courts Act 2016 (2016 No 48).
              • Section 78(5): substituted (with effect on 3 December 1985), on , by section 34(5) of the Goods and Services Tax Amendment Act 1986 (1986 No 43).
              • Section 78(6): added, on , by section 168 of the Taxation (GST, Trans-Tasman Imputation and Miscellaneous Provisions) Act 2003 (2003 No 122).