Quick Summary
Annual reviews are crucial for GST adjustments in New Zealand, as they ensure that the proportion of GST claimed on assets reflects their actual use in your taxable activity over time. If the business or private use changes, an adjustment must be made in your GST return for that period.
Details
The Importance of Annual Reviews for GST Adjustments
For assets that are used for both taxable (business) and non-taxable (private or exempt) purposes in New Zealand, periodic reviews are essential to maintain GST compliance. The annual review is a key part of this process.
- Purpose of Review: The annual review serves to compare the actual use of an asset during the review period with the use originally anticipated or previously reported.
- Triggering Adjustments: If there has been a change in the percentage of taxable use (i.e., business use increases or decreases), an adjustment is required to be made in your GST return.
- Increased Taxable Use: You may be able to claim additional GST.
- Decreased Taxable Use: You may need to return some GST previously claimed.
- Choosing Your Adjustment Period: Businesses can choose their adjustment period, but it must align with their balance date. The number of required adjustment review periods and thresholds (e.g., for items $20,000 or less) have been adjusted from 1 April 2023 to simplify the process.
Source: GST guide (IR375)