- 2014, t302, topic 3, taxable activity & regn, 1 slide

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TAXN 302 Topic 3 Taxable activity & registration

David White

Copyright 2014 D I White

Overview of lectures

1. NZ GST Model & core concepts2. Taxable activity & registration3. Supplies taxable, exempt & zero-rated4. Invoices, taxable periods & returns5. Input tax credits6. Land transactions7. International transactions8. Revision

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Readings: Taxable activity

New Zealand Taxation 22.3 White & Trombitas 3.1.1, 3.2 Blanchard in Krever & White 99-101. See GST

course readings folder in BB Newman v Commissioner of Inland Revenue

(1995)(CA) & other subdivision cases in NZT 22.3.4

CIR v Bayly Trust (1998)(CA) Allen Yacht Charters Limited v CIR (1994) cf

Case P73 (1992)

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GSTAct:section8:Impositionofgoodsandservicestaxonsupply

(1) SubjecttothisAct,atax,tobeknownasgoodsandservicestax,shallbechargedinaccordancewiththeprovisionsofthisActattherateof15percentonthesupply (butnotincludinganexemptsupply)inNewZealandofgoodsandservices,onorafterthe1stdayofOctober1986,byaregisteredpersoninthecourseorfurtheranceofataxableactivitycarriedonbythatperson,byreferencetothevalueofthatsupply.

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Who is a GST taxpayer? Use taxable activity not income tax concept of business: Why?

Income Tax Act: s YA 1business(a) includes any profession, trade, or

undertaking carried on for profit:(b) includes the activities of

(i) a statutory producer board:(ii) an airport operator:

(c) is further defined in section DD 11

Grieve v CIR (1984) CA see discussion in NZ Taxation 4.2

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GSTAct:section6:meaningoftermtaxableactivity(1) ForthepurposesofthisAct,thetermtaxableactivitymeans(a) anyactivity whichiscarriedoncontinuouslyorregularlybyanyperson,whetherornotforapecuniaryprofit,andinvolvesorisintendedtoinvolve,inwholeorinpart,thesupplyofgoodsandservicestoanyotherpersonforaconsideration;andincludesanysuchactivitycarriedonintheformofabusiness,trade,manufacture,profession,vocation,association,orclub:(b) withoutlimitingthegeneralityofparagraph(a)ofthissubsection,theactivitiesofanypublicauthorityoranylocalauthority

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GST Act: section 6(3): what is excludedNotwithstanding anything in subsections (1) and (2) of this section, for the purposes of this Act the term taxable activity shall not include, in relation to any person,(a) being a natural person, any activity carried on essentially as a private recreational pursuit or hobby; or

(aa) not being a natural person, any activity which, if it were carried on by a natural person, would be carried on essentially as a private recreational pursuit or hobby; or

(b) any engagement, occupation, or employment under any contract of service or as a director of a company:Provided that where any person, in carrying on any taxable activity, accepts any office, any services supplied by that person as the holder of that office shall be deemed to be supplied in the course or furtherance of that taxable activity; or

(c) any engagement, occupation, or employment(i) pursuant to the Civil List Act 1979 or the Governor-General Act 2010:(ii) as a Judge, Solicitor-General, Controller and Auditor-General, or Ombudsman:(iia) pursuant to an appointment made by the Governor-General or the Governor-General in Council and evidenced by a warrant or by an Order in Council or by a notice published in the Gazette in accordance with section 2(2) of the Official Appointments and Documents Act 1919:(iii) as a Chairman or member of any local authority or any statutory board, council, committee, or other body; or

(d) any activity to the extent to which the activity involves the making of exempt supplies 8

Justice Blanchard in Krever & White p101

I summarise my understanding of what is required for a taxable supply (including a zero-rated supply). I suggest that, for present purposes, seven elements must have been present:

(a) An activity(b) carried on regularly or continuously (not necessarily for

profit)(c) in the course or furtherance of which(d) a supply is made or deemed to be made(e) by one person (the taxpayer registered or required to be

registered for GST) to another(f ) for a consideration (not necessarily from the recipient)(g) motivated by or in response to the supply.

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Key taxable activity issues

Who collects GST & who pays it? Activity? Continuous or regular? Supply? For a

consideration? Taxable activity or hobby? Taxable activity or isolated venture? Transaction sufficiently connected with taxable

activity? Transaction sufficiently contemporaneous with

taxable activity?

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Approach to answering law questions

ILAC is one (simplified) approach

1. Issue and facts

2. Law legislation and cases

3. Application of law to facts

4. Conclusion

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ILAC:Whatstep?NewmanvCIR(1995)17NZTC12,097

RichardsonJ:Thisappealconcernsanarrowbutimportantpoint.Itiswhetherthesubdivisionandsalebyataxpayerofasectioncutoffhisorherhomepropertyisliabletogoodsandservicestax.Intermsofs8(1)oftheGoodsandServicesTaxAct1985taxischargedonthe"supply"ofgoodsandservicesbyaregisteredperson"inthecourseorfurtheranceofataxableactivity".FactsTheappellantisabuilderandisregisteredforGSTpurposes.In1984hepurchased2.7hectaresoflandfor$54,000forthepurposeofbuildingafamilyhome.Hecompletedthebasementareaofthehousein1985andthefamilymovedintooccupation.Earlyin1986hefoundhimselfinfinancialdifficultiesandwasunabletoborrowfurtherfunds.InMarch1986heinstructedsurveyorstoprepareaschemeplanforpossiblesubdivisionofthepropertyinto2lots.TaxabilityofthesaleTheshortpointiswhetherthesubdivisional activityengagedinbytheappellantmayproperlybecharacterised asanactivitywhichwascarriedoncontinuouslyorregularlybytheappellant.Ifso,itisobviousthatitwouldinvolveorwasintendedtoinvolvethesupplyofgoods(andlandiswithinthedefinitionofgoods)toanyotherpersonforaconsideration.


Thechargefortaxisimposedonthesupplyofgoodsandservicesbyaregisteredpersoninthecourseorfurtheranceofataxableactivitycarriedonbythatpersonandbyreferencetothevalueofthatsupply(s8).

Thelegislationisdirectedatacourseofconductwhichcanfairlybedescribedasbeingcarriedoncontinuouslyorregularly.AsIseeit,itisnotamatterofimportinganyoverlayofcommercialdealingoroftryingtodrawadistinctionbetweenthedivestmentofcommercialassetsandprivateassets.Ratheritiswhethertheprocessengagedin,whatevertheassetoritslocationortheoccupationofthetaxpayer,comeswithinthestatutorylanguage.Theapplicationofthetesttotheparticularcircumstanceswillnecessarilyinvolvequestionsoffactanddegree.


Theactivityengagedinbytheappellantinrelationtothislandtoprovidethefrontlotforsalewas,ontheevidence,astraightforwardsubdivision.Therewasnodevelopmentworkontheproperty.Theactivitywasnotrepeatedovertimeeithercontinuouslyorregularly.Itdidnotinvolverepeatedacts.Thefurtherrequirementinthepresentcasethattheactivitybecarriedoncontinuouslyorregularlyreinforcestheneedtotakeanoverallviewoftheactivity.


Itisneithernecessarynordesirabletoexpressanyviewastowhatwouldhavetobeinvolvedinaparticularsubdivisionaldevelopmenttobringtheactivitywithins6.Thatmustdependonanassessmentofthecircumstancesoftheparticularcase.Itissufficienttoconclude,asIdo,thatthelimitedactivityengagedinbytheappellantinthiscasedoesnotcomewithinthestatutorytest.ForthereasonsgivenIwouldallowtheappeal.

Taxableactivityorhobby?

AllenYachtChartersLimitedvCIR (1994) Berth Marketingandadvertising Numberofcharters

Cf.CaseP73(1992) Dominantreason Numberofcharters

IRD,TIBVol 6,No14(1995) Factorstotakeintoaccount

Taxableactivityorisolatedventure?

Newman vCommissionerofInlandRevenue(1995) Singleresidentialsubdivision Commercialbuildingconstructionandsale

CIR vBayly Trust(1998)(CA) Trusteesexecutedeedtopartnerstofarm Isolatedsingleactionortaxableactivity?

Transaction sufficiently contemporaneous and connected with taxable activity?

GST Act: section 6(2)Anything done in connection with the beginning or ending, including a premature ending, of a taxable activity is treated as being carried out in the course or furtherance of the taxable activity.

Case P73 (1992) in BBcf. Case T30 (1997) NZ Taxation para 22.3.1

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