PwC's GST spokesperson and expert, Eugen Trombitas wants to make you aware a significant change to the GST base in the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Bill presented in Parliament this afternoon.
The Bill makes amendments to the GST treatment of late payment fees, meaning late payment fees will be subject to GST.
Eugen Trombitas is sitting by the phone and happy to be interviewed on the topic. Please feel free to ring him directly on 021 493 903.
Mr Trombitas says "this is a surprise and a significant change that will impact many people and businesses as the GST base has just been expanded - and not supported by first principles of GST."
Traditionally late payment fees have not been subject to GST as they are not part of the price of goods/services - instead they are a payment for breach, infringement or compensation for damages.
Mr Trombitas warns "businesses need to be alert to the fact it is being applied retrospectively unless a specific savings provision applies (in which case they will have 1 April 2012 to make the systems changes)."
Another important amendment in the Bill is to reverse unintended outcomes of a new rule which meant a business purchaser could not recover GST on costs if the final product or service was provided to (and consumed by) a person who is not registered for GST.
Mr Trombitas says "this proposed change is a welcome development."