Home > Updates > GST removal will end commercial building depreciation
In the run up to the election, we are keeping a keen eye on tax policy releases by the various political parties.
New Zealand’s broad based GST system, as it stands, is generally viewed as economically cost efficient to collect. However, last week Labour has announced that if re-elected, they will remove GST from fresh fruit and vegetables. To non-accountants this may seem like a good idea, however, the devil will be in the detail of what is and is not considered “fruit and vegetables”.
The rule change doesn’t just apply to supermarkets and end consumers; small grocers, restaurants, food producers and manufactures, could all be impacted.
Bookkeepers and accountants for all affected businesses will unavoidably spend more time preparing GST returns. Either directly or indirectly, the additional costs will inevitably be passed on to consumers.
Buried at the end of the policy release was the answer to how the GST tax shortfall will be funded. Labour also propose removing tax deductions for commercial building depreciation. Tax deductibility of commercial building depreciation was reinstated from the 2021 income year as part of the Covid measures to support businesses. There was no indication at the time of its reintroduction that this was only a temporary measure.
Taxpayers and investors value certainty in the tax system, so this flip-flop of the rules has a sense of whiplash. Many commercial landlords were very generous with rent relief during Covid and they are now facing interest rate hikes and occupancy challenges. Removing the tax deduction for commercial building depreciation would place further inflationary pressure on commercial rents for all businesses.
We are following developments in this space closely.
Our Auckland and Christchurch offices have Tax Consulting specialist services, and are ready to guide you and your business with tax policy changes in New Zealand. Please get in touch with your Nexia advisor or our Tax Consulting team if you would like to discuss.