The GST hike to 15 percent comes in from October. But what happens about goods or services we've already signed a contract for, or are paying off on instalments?
Rates
You may have received a rates letter suggesting you pre-pay your rates for the year (rather than by instalments). The carrot is you'll pay the whole year’s rates bill at 12.5 percent rather than at the new rate on the remaining instalments. But any benefit from prepaying a large bill like this is questionable.
The rise in GST means you could save up to an extra 2.22 percent by prepaying. However, that doesn't take into account the interest that you could earn by keeping that money in a savings account until payment is due.
Insurance and other contracts
If you have an insurance policy (or any annual contract) that runs for 12 months and you pay monthly, you’ll only have to pay 12.5 percent GST until it’s time to renew your contract. But there are a few tricky points – you must have the option of paying the entire contract upfront and the insurer must apply for you to pay at the 12.5 percent rate. (This “tweak” will be the result of legislation currently before Parliament.)
For lay-bys that are paid off before 1 October you will pay GST at 12.5 percent. Lay-bys that have not been paid off until after 1 October will have GST at 15 percent. This is because, legally speaking, a lay-by doesn’t become a purchase until you’ve made all the payments. So if you finish your payments after 1 October, the law says you’ve bought the goods in the new GST period.
However, the government decided to be merciful on people who’d started a lay-by before the 20 May announcement. If you did that and the store sent in the GST it collected on your layby before 1 October then you'll pay GST at 12.5 percent on payments made before 1 October. For payments after that you may be charged 15 percent, depending on whether the business chooses to charge this or absorb the cost.
Finance leases entered into before 1 October (up to a maximum of 5 years) can continue to incur GST at 12.5 percent as long as the supplier chooses to use this rate.
“Hire purchase” deals entered into before 1 October will be at the old rate and those started on or after 1 October will be at the new 15 percent rate.
A 2.5 percent increase?
A product priced at $100 excluding GST currently sells for $112.50. With GST increasing to 15 per cent, it would sell for $115 – an increase of 2.22 per cent – not the 2.5 per cent many people have assumed.
15 percent = how many dollars?
To calculate the GST component of a GST-inclusive amount, multiply the figure by 3 and then divide by 23.
More information
- IRD: www.ird.govt.nz/changes
- GST advice: www.gstadvisory.govt.nz
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I was wondering whether a montly train ticket for October, purchased in September, should have included the GST increase? While there is not much difference in price if everyone is charged extra it soon adds up.
I got a 'GST increase' notice from Mr Green this week, stating that due to the GST rise my bill will change from $44 per month to $48 per month. I did the sums and a 6.7% increase had also been hidden in there.
I contacted our man from Mr Green and said they had made a mistake; they then told me that there was an 'inflationary increase' that they had also included. I cancelled our contract on the spot - if they are sharp enough to hide a price rise as GST then I can't trust them.
Watch out for others hiding price rises in the 'GST increase'
Rod
Are they allowed to do this our broadband provider will be putting up their cost by 15% stating that because of gst going up, and the increase in running costs from their providers.
The current pricing list will be exclusive of gst and will be reflected in the october invoice.
so where we were paying $45 including GST we are now going to be paying $45 plus GST. Can they do this??
Where will we stand as regards the building of a new house (cost approx $400k) which has commenced but will not be completed until after the GST rise takes place? The contract refers only to a GST inclusive amount.
The government is requiring the extra GST not the company. The company can only submit a GST return for income they actually receive, not income that is promised. And income received (payments you make) after that date attract GST at a higher amount. The company is not making any extra money off you, the govt is. If you want to avoid paying the goverment any extra money, you need to pay before that date. Tho' it seems to me that $250 extra on $10,000 is rather small potatoes when it comes to the general stresses of a wedding!
I was wondering what our righs are as reards GST on the following senario. My daughter is getting married in January. They have booked and signed a contract fo a function where the menu price per person is $82.50 including GST, with a minimum charge of $10000.00. The venue hire is included in the minimum charge. They have been informed that an additional 2.5% will be made to payments after the 30/9/2010, is this allowed?
Thanks