The issue being referred to here is commercial reality. If it can be shown that the only or dominant reason that a particular change in operations is made is to obtain a taxation benefit, then the change can be challenged under Anti-Tax Avoidance Measures.
So, it would be wise to think of ways that a business may be reasonably separated into discrete business units. For example, are there local and overseas customers? Can the overseas customers be serviced from another company, and therefore not have to be charged GST? They cannot claim the GST charged by another country, and the higher price to them may make them think about using your service.
If there are adult and children’s classes for martial arts classes, can they be split up into different companies, with neither company having to register for GST? If the customers are private individuals, and not businesses that can claim GST, why keep the business large and have to pay GST, whether or not you can recover the GST from the customers in your pricing?
If you have an arts and crafts school, can you separate the arts from the crafts? Are there different teachers? What is the commercial reality for the change?
If you are exporting products, they will be exempt from GST. No tax planning is required in the case of export of products. So we are talking about services that are provided in one country for the benefit of overseas customers or clients.
About The Author
Christopher Raynal is the Director of Master Accountants Group Limited, a tax and management consultancy based in Auckland, New Zealand. The practice specializes in rental properties, wrap mortgages, small business development and asset protection structures. The website may be accessed at www.masteraccountants.co.nz for further articles of interest.
chris@masteraccountants.co.nz
