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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 concepts
2. Taxable activity & registration
3. Supplies taxable, exempt & zero-rated
4. Invoices, taxable periods & returns
5. Input tax credits
6. Land transactions
7. International transactions
8. 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,tobeknownas
goodsandservicestax,shallbechargedin
accordancewiththeprovisionsofthisActatthe
rateof15percentonthesupply (butnot
includinganexemptsupply)inNewZealandof
goodsandservices,onorafterthe1stdayof
October1986,byaregisteredpersoninthe
courseorfurtheranceofataxableactivity
carriedonbythatperson,byreferencetothe
valueofthatsupply.
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Who is a GST taxpayer? Use taxable activity not
income tax concept of business: Why?
Income Tax Act: s YA 1
business
(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,thetermtaxableactivity
means
(a) anyactivity whichiscarriedoncontinuouslyor
regularlybyanyperson,whetherornotforapecuniary
profit,andinvolvesorisintendedtoinvolve,inwholeorin
part,thesupplyofgoodsandservicestoanyotherperson
foraconsideration;andincludesanysuchactivitycarried
onintheformofabusiness,trade,manufacture,
profession,vocation,association,orclub:
(b) withoutlimitingthegeneralityofparagraph(a)ofthis
subsection,theactivitiesofanypublicauthorityorany
localauthority
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GST Act: section 6(3): what is excluded
Notwithstanding 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
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J ustice 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.Itiswhetherthesubdivisionandsaleby
ataxpayerofasectioncutoffhisorherhomepropertyisliabletogoodsandservicestax.In
termsofs8(1)oftheGoodsandServicesTaxAct1985taxischargedonthe"supply"of
goodsandservicesbyaregisteredperson"inthecourseorfurtheranceofataxable
activity".
Facts
TheappellantisabuilderandisregisteredforGSTpurposes.In1984hepurchased2.7
hectaresoflandfor$54,000forthepurposeofbuildingafamilyhome.Hecompletedthe
basementareaofthehousein1985andthefamilymovedintooccupation.Earlyin1986he
foundhimselfinfinancialdifficultiesandwasunabletoborrowfurtherfunds.InMarch1986
heinstructedsurveyorstoprepareaschemeplanforpossiblesubdivisionoftheproperty
into2lots.
Taxabilityofthesale
Theshortpointiswhetherthesubdivisional activityengagedinbytheappellantmay
properlybecharacterised asanactivitywhichwascarriedoncontinuouslyorregularlyby
theappellant.Ifso,itisobviousthatitwouldinvolveorwasintendedtoinvolvethesupply
ofgoods(andlandiswithinthedefinitionofgoods)toanyotherpersonforaconsideration.
ILAC:Whatstep?
NewmanvCIR(1995)17NZTC12,097
Thechargefortaxisimposedonthesupplyofgoodsandservicesbyaregistered
personinthecourseorfurtheranceofataxableactivitycarriedonbythatpersonand
byreferencetothevalueofthatsupply(s8).
Thelegislationisdirectedatacourseofconductwhichcanfairlybedescribedasbeing
carriedoncontinuouslyorregularly.AsIseeit,itisnotamatterofimportingany
overlayofcommercialdealingoroftryingtodrawadistinctionbetweenthe
divestmentofcommercialassetsandprivateassets.Ratheritiswhethertheprocess
engagedin,whatevertheassetoritslocationortheoccupationofthetaxpayer,
comeswithinthestatutorylanguage.Theapplicationofthetesttotheparticular
circumstanceswillnecessarilyinvolvequestionsoffactanddegree.
ILAC:Whatstep?
NewmanvCIR(1995)17NZTC12,097
Theactivityengagedinbytheappellantinrelationtothislandtoprovidethefrontlot
forsalewas,ontheevidence,astraightforwardsubdivision.Therewasno
developmentworkontheproperty.Theactivitywasnotrepeatedovertimeeither
continuouslyorregularly.Itdidnotinvolverepeatedacts.

Thefurtherrequirementinthepresentcasethattheactivitybecarriedon
continuouslyorregularlyreinforcestheneedtotakeanoverallviewoftheactivity.
ILAC:Whatstep?
NewmanvCIR(1995)17NZTC12,097
Itisneithernecessarynordesirabletoexpressanyviewasto
whatwouldhavetobeinvolvedinaparticularsubdivisional
developmenttobringtheactivitywithins6.Thatmustdepend
onanassessmentofthecircumstancesoftheparticularcase.It
issufficienttoconclude,asIdo,thatthelimitedactivityengaged
inbytheappellantinthiscasedoesnotcomewithinthe
statutorytest.ForthereasonsgivenIwouldallowtheappeal.
Taxableactivityorhobby?
AllenYachtChartersLimitedvCIR (1994)
Berth
Marketingandadvertising
Numberofcharters
Cf.CaseP73(1992)
Dominantreason
Numberofcharters
IRD,TIBVol 6,No14(1995) Factorstotake
intoaccount
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 BB
cf. Case T30 (1997) NZ Taxation para 22.3.1
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