Goods and Services Tax Act 1985

Transitional provisions

86: Alternative method of accounting for transitional supplies

You could also call this:

"A simpler way to account for tax on some supplies when the GST law changed"

Illustration for Goods and Services Tax Act 1985

When you are a registered person who has to account for tax payable on a payments basis under section 19, you can apply to the Commissioner. The Commissioner will then decide if you can use a different method for accounting for tax on certain supplies. This method applies to supplies the Commissioner chooses.

If the Commissioner makes this decision, you will have to account for tax on an invoice basis for certain supplies under section 19. This is for supplies where an invoice was issued or payment was received before 1 October 1986. You will be treated as if you received full payment for these supplies on 1 October 1986.

For supplies where you haven't been paid in full by 30 September 1986, you can set off the tax you owe against the amount you are still owed. You do this for the taxable period that includes 1 October 1986. If you can't set off the full amount, you carry it over to the next taxable period.

For supplies where no invoice was issued and no payment was received before 1 October 1986, and section 84 applies, you set off the tax you owe against the amount you are owed. You do this for a taxable period before 1 October 1987. If you can't set off the full amount, you carry it over to the next taxable period.

If you receive payment on or after 1 October 1986 for these supplies, it's treated as payment for a taxable supply. You must include this payment as output tax in the taxable period you received it. If you write off a bad debt on or after 1 October 1986, it's also treated as payment for a taxable supply. You must include this amount as output tax in the taxable period you wrote it off.

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This page was last updated on 18 July 2025

View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM85578.

Topics:

Money and consumer rights > Taxes

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Part 12Transitional provisions

86Alternative method of accounting for transitional supplies

For the purposes of this Act, where any registered person who is required to account for tax payable on a payments basis pursuant to section 19 makes application, the Commissioner shall direct that the provisions of this section shall apply to that registered person in respect of any supply or class of supply determined at the discretion of the Commissioner (hereafter in this section referred to as a specified supply).
For the purposes of this Act, in respect of any specified supply, where the Commissioner has made a determination in accordance with subsection (1),—
the supplier shall be deemed to be required to account for tax payable on an invoice basis pursuant to section 19 for each such specified supply to which section 84 applies and in respect of which an invoice has been issued or any payment received prior to 1 October 1986, and shall be deemed to have received payment in full on 1 October 1986 for each such supply:
where any amount of the consideration in money for that supply (not being a supply to which paragraph (c) applies) remains unpaid as at the end of 30 September 1986 (not being an amount written off as a bad debt as at that date), the supplier shall set off against any amount of tax payable by that supplier in respect of the taxable period in which 1 October 1986 occurs, an amount equal to the tax fraction of the amount of such consideration remaining unpaid, and to the extent that it cannot be so set off, that amount shall be carried forward to the next taxable period and set off against any amount of tax payable by that supplier in respect of that next taxable period, and so on:
where any supply to which section 84 applies and in respect of which no invoice has been issued nor any payment received prior to 1 October 1986, the supplier shall, in any one taxable period ending prior to 1 October 1987, set off against any amount of tax payable by that supplier in respect of that taxable period, an amount equal to the tax fraction of the portion of the consideration in money in respect of any such supply that, by virtue of section 84(3)(a), is not subject to tax pursuant to section 8(1), and to the extent that it cannot be so set off, that amount shall be carried forward to the next taxable period and set off against any amount of tax payable by that supplier in respect of that next taxable period, and so on:
any payment received on or after 1 October 1986 in respect of any specified supply to which paragraph (b) or paragraph (c) applies shall, notwithstanding anything in this Act, be deemed to be consideration in money for a taxable supply made by that supplier and charged with tax pursuant to section 8(1), and the supplier shall include as output tax, in the taxable period during which that payment has been received, an amount equal to the tax fraction of that payment:
where and to the extent that any amount remaining unpaid to which paragraph (b) or paragraph (c) applies is written off as a bad debt on or after 1 October 1986, that amount written off shall, notwithstanding anything in this Act, be deemed to be consideration for a taxable supply made by that supplier and charged with tax pursuant to section 8(1), and the supplier shall include as output tax, in the taxable period during which that amount is written off as a bad debt, an amount equal to the tax fraction of that amount written off.

Notes

Section 86: added (with effect on 3 December 1985), on 8 August 1986, by section 38 of the Goods and Services Tax Amendment Act 1986 (1986 No 43).
Section 86(1): amended, on 2 June 2016, by section 207 of the Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 (2016 No 27).