Govt likely to exempt Sept bills from tax rise

Consumer New Zealand chief executive Sue Chetwin. Photo / Supplied

The Government is considering changing the new GST Act to ensure that the public is not charged 15 per cent GST on utilities used in September.

The Cabinet will also consider next week whether to change the act to prevent tax increases on layby deals signed before the higher rate comes into effect on October 1.

News that customers may be charged only 12.5 per cent GST by utility and telecommunications companies, instead of the proposed 15 per cent, when bills are sent out in October for services provided in September, is "great", said Consumer New Zealand chief executive Sue Chetwin.

If the changes are approved, the lower rate will be effective only for accounts sent in October for September services.

The following month the GST rate will increase to 15 per cent as set out in this year's Budget.

"There has been a lot of confusion about the [proposed] changes, and queries about bills and laybys," Ms Chetwin said. "I don't think they [Inland Revenue] knew then what the impact would be. Consumers should not be disadvantaged."

It had been difficult advising people on the changes because the proposals had not been clear.

"We thought we knew the answers, but the IRD didn't know them either. Hopefully, [the new changes] will provide some clarity," she said.

Ernst & Young tax partner Joanna Doolan said consumers of layby sales, such as Christmas Club memberships, will be happy with the proposed changes as they will be paying less GST if approved than under the original proposals.

The same goes for consumers who have entered into layby sales before the May 20 Budget announcement, but to take full advantage of the changes, laybys should be paid off on or before September 30.

The Cabinet will have to approve the proposed changes before the amendments become law.

This is set to happen on Monday. Submissions are still open.