Inland Revenue to review “obsolete” GST registrations
19 July 2016
Inland Revenue have indicated they will review inactive GST registrations.
There is a concern that there are a number of persons who have registered for GST previously whose GST activity has ceased. Anecdotally we understand that there are potentially around 15,000 GST registrations that are inactive.
A consequence of GST de-registration is a requirement to pay GST on the market value of all assets held within the GST registration.
It is our view that Inland Revenue will likely focus their attention to GST registered owners of life-style blocks. We are aware that often a person acquiring a life-style block will seek to voluntarily register for GST to reduce the cost of entry. The issue arises where the GST activity ceases at a later point in time, resulting in a GST cost (as above), but the cost of the property has increased significantly and the person cannot afford to pay the GST on de-registration without disposing the property (or other valuable assets).
We expect to see formal communication in this regard in due course.