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Goods and Services Tax Act 1985

Returns and payment of tax - Calculation of tax payable: deductions, apportionment, other adjustments

26AA: Marketplace operators: bad debts for amounts of tax

You could also call this:

"Marketplace operators can claim back tax on bad debts for unpaid goods or services."

Illustration for Goods and Services Tax Act 1985

If you are a marketplace operator, this section applies to you if you supply goods or services under section 60C or 60D and you charge a fee to the person who actually provides the goods or services. You must also give the government a return about the taxes for that period and account for those taxes. You have an agreement with the supplier to pay you a certain amount, which includes the tax on the supply. If you write off a bad debt, which is when someone does not pay you, you can make a deduction for the tax you charged on that supply.

If you get some of that bad debt back later, you have to account for some of the tax again, which is a fraction of the deduction you made earlier. This fraction is calculated by dividing the amount you got back by the total amount you wrote off. You can find more information about how to make deductions in section 20(3).

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=LMS289937.

Topics:
Money and consumer rights > Taxes
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26: Bad debts, or

"Claiming back tax on bad debts when someone doesn't pay you"

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26A: Factored debts, or

"Selling debts and how it affects your taxes"

Part 3Returns and payment of tax
Calculation of tax payable: deductions, apportionment, other adjustments

26AAMarketplace operators: bad debts for amounts of tax

  1. This section applies to a marketplace operator who is the supplier under section 60C or 60D of distantly taxable goods, remote services, or listed services provided by a person who is not an associated person and—

  2. charges the underlying supplier a fee for making the taxable supply; and
    1. furnishes a return in relation to the taxable period during which the output tax on the supply is attributable; and
      1. accounts for the output tax on the supply; and
        1. has an agreement with the underlying supplier under which the underlying supplier is required to pay to the marketplace operator, from consideration received by the underlying supplier from the supply, an amount (the debt) that includes the amount of output tax on the supply for which the marketplace operator accounts; and
          1. the marketplace operator writes off as a bad debt the total amount consisting of the fee and debt referred to in paragraphs (a) and (d) (the write-off).

            1. The marketplace operator shall make a deduction under section 20(3), or account for a reduction in output tax, equal to the tax charged on the taxable supply.

            2. If the marketplace operator recovers in a later taxable period an amount of a bad debt that gave rise to a deduction or reduction under subsection (2), the marketplace operator shall account for an amount of output tax that is a fraction of the amount of the deduction or reduction, where the fraction is calculated by dividing the amount of the recovery by the amount of the write-off.

            Notes
            • Section 26AA: inserted, on , by section 32 of the Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Act 2019 (2019 No 33).
            • Section 26AA(1): amended, on , by section 146(1) (and see section 146(2) for application) of the Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 (2023 No 5).