NZ insurers to benefit from GST amendments

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26 July 2010

The New Zealand insurance industry is set to benefit from transitional relief to be granted to firms ahead of an increase in GST from October.

The increase from 12.5% to 15% has raised concerns about its effect on general and health insurance contracts and finance leases.

Revenue Minister Peter Dunne has responded by proposing legislative amendments that would “grandfather” certain contracts at the old rate of 12.5%.

It would apply to contracts that straddle October 1, “subject to certain criteria,” Mr Dunne said on Friday.

“Legislative change will address compliance costs for affected businesses and, where required, provide much needed certainty,” he said.

The proposed changes stem from the recently appointed GST Advisory Panel, which is working with NZ Inland Revenue on tackling issues raised by the rate increase.

Other changes will ensure that certain contracts which have either been fully invoiced and performed, or in some cases fully paid but not fully performed, also remain at the 12.5% rate.

Insurance Council of New Zealand (ICNZ) Manager Finance and Regulation Terry Jordan told insuranceNEWS.com.au the insurers are divided on the way they intend to treat the GST rise.

“Some companies would prefer to go through in the normal way and apply the changes from October 1 while others, due to their systems and processes, want to be able to charge 12.5% until the next renewal,” he said.

ICNZ has encouraged its members to make independent submissions to the GST Advisory Panel. Mr Jordan says NZ insurers are awaiting further detail on proposed amendments before they can make all the necessary changes to their systems, with costs expected to be significant.