Confusion over leaky building GST refunds

Robin Oliver of OliverShaw, a former deputy commissioner of Inland Revenue now in private practice, described the department's statement as a "fob off". Photo / Mark Mitchell

Confusion surrounds the ability of body corporates of leaky buildings to claim GST refunds, as the Inland Revenue seems reluctant to have its decisions in two leading cases stand as precedents.

The cases, pursued by tax specialists nsaTax in Auckland and OliverShaw in Wellington, relate to compensation payments used to fund the repair of leaky buildings.

In each case the Inland Revenue has conceded after lengthy deliberation that the body corporate can register for GST and claim back the GST content of the repair work it has had done, even though no GST was paid (and no input tax credit claimed) on the compensation payment.

"Because a lot of advisers have been telling them they are not eligible to register for GST, a lot of body corporates who have received settlement receipts, undertaken their remediation work and moved on are not aware the IRD could make a significant contribution to their costs," nsaTax director Graeme Carruthers said.

But a spokesperson for Inland Revenue said: "The commissioner is aware that the issue of whether body corporates can register for GST is a somewhat uncertain area and that inconsistent practice has occurred.

"While Inland Revenue has recently dealt with a few specific cases where, on their facts, they were able to be registered for GST, the commissioner is in the process of considering the correct approach going forward."

IRD intended to release an issues paper for public consultation in the near future and in the meantime, any current cases would be dealt with on a case-by-case basis.

Robin Oliver of OliverShaw, a former deputy commissioner of Inland Revenue now in private practice, described the department's statement as a "fob off".

It was difficult to see how the two cases could be regarded as special, he said.

Oliver noted the IRD had analysed his firm's case for more than a year and the nsaTax one for even longer, even though there were only two brief court decisions, which came to opposing conclusions, to consider.

"There is really not that much to analyse. A private sector practitioner could not survive on that much thinking time," he said.

Carruthers said there could be no doubt a body corporate involved in significant remedial work to repair a leaky building could register for GST.

"This is the position adopted by Inland Revenue in relation to the lead case which nsaTax took and which the IRD conceded after determining a national policy on that technical issue. It is also the position adopted by the Australian courts and the Australian Tax Office."