The Inland Revenue Department (IRD) has pushed back further the deadline for resolving the long-running issue of how GST applies to NZ retail managed fund fees.
First tabled for informal industry discussion late in 2015, the IRD had slated two formal ‘questions we’ve been asked’ (QWBAs) consultation papers for publication this July.
According to an IRD schedule of works at the time the QWBAs would address whether “services provided by a unit trust manager are a financial service”.
The July IRD note said the consultation documents were intended to “communicate IR’s changed views on GST treatment of the relevant fees”.
In its latest works update, the IRD says it is “considering issues” in relation to GST and fund fees.
However, an IRD spokesperson said the QWBAs were still on the agenda and due for publication later this month or in November.
“Or maybe later,” the IRD spokesperson said.
In October 2015 the IRD circulated a private discussion document outlining why fund management fees should be GST-exempt.
The 2015 IRD document says the financial services label applies across the four broad unit trust management activities, namely: issuing or redeeming units; handling cash flows; making and implementing investment decisions, and; administration.
Under current settings, unit trust management fees attract GST on 10 per cent of the total.
If adopted, the IRD call to remove GST from fund fees would likely have downstream effects on how managers charge for services, or even how they structure their businesses.
Without the ability to offset GST on input costs, boutique managers would probably have to hike base fees to cover any increase in expenses. However, funds housed within larger conglomerates are able to more easily shift GST-related costs between business units.