About Good Returns  |  Advertise  |  Contact Us  |  Terms & Conditions  |  RSS Feeds Other Sites:   depositrates.co.nz  |   landlords.co.nz
Last Article Uploaded: Friday, August 22nd, 4:19PM
rss
Latest Headlines

Fund managers and IRD in Mexican Stand Off

IRD threatens to charge GST on management fees and back date charges for four years.

Wednesday, April 4th 2001, 7:53AM

by Philip Macalister

Fund managers and investors are facing a new threat on the tax front - this time it's the imposition of GST on management fees.

KPMG Legal tax partner Tony Lines says the industry has never charged GST on management fees in the past, however the Inland Revenue Department (IRD) has said that they should be.

"Since 1986 most management fees and trustee fees for collective investment vehicles have not been charged with GST," he told a BIIA Funds Management conference in Auckland last week. "Similarly it would be rare for a domestic investment manager to charge GST on investment management fees."

Lines says that managers have assumed these activities constitute the bulk of administration and investment management activity, therefore making them fully exempt from GST.

IRD has decided that a portion of management and trustee fees should be subject to GST.

Lines says there is currently a Mexican stand-off" between the industry and IRD on the issue.

IRD has said it will develop a policy paper on the issue, but it's opening position is that is that it can charge GST for at least the past four years, and develop a policy going forward.

Lines says this situation is an ideal candidate for a "policy solution". That is one where fund managers and IRD sit down together and negotiate a suitable arrangement to cover the past and a workable policy going forward.

His view is that if they argue over what parts of the fees should be taxable and which are exempt the debate would go on forever.

Another crucial issue for managers is how to apportion past GST costs.

"Some managers and trustees will be in a position to pass on these costs to unit trusts and group investment funds; others may be obliged to absorb the liability themselves," he says. "The critical question is whether there is a liability in fact and if so whether or not the IRD's claims for apportioned GST are excessive."

Lines says two of the other concerns with charging GST on management fees is that they are another disincentive to savers, plus the rules are being applied unevenly as superannuation schemes are specifically exempted from the impost.

"Investors' confidence in savings products could be dented if the liability for past GST not charged is material and is borne by savings vehicles themselves," he says.

Going forward the problem is less significant as managers will be able to claim a portion of input credits to partially offset the liability.

When GST was introduced super schemes were the main form of investing, and unit trusts and gifs hardly existed.

"The legislation has failed to keep up with developments over the past decade and beyond so once again a lack of level playing field has developed."

You can read Philip's blog here: http://www.goodreturns.co.nz/blog/

« BNZ goes head to head with OrdsSovereign takes regulation bull by the horns »

Special Offers

Commenting is closed

 

print

Printable version  

print

Email to a friend
News Bites
Latest Comments
  • van Eyk suspends fund redemptions
    “This event demonstrates the challenges in remaining an independent research house, when you're also a manager of money (assuming...”
    10 hours ago by Pragmatic
  • van Eyk suspends fund redemptions
    “http://www.theaustralian.com.au/business/companies/further-strife-hits-van-eyk/story-fn91v9q3-1227031253622# quote- THE...”
    13 hours ago by Hmmm
  • It's always the adviser's fault - not
    “How are we supposed to keep up with continually changing policy terms, conditions, wordings and exclusions? Then a new company...”
    13 hours ago by Andy
  • It's always the adviser's fault - not
    “I am sure we have all had it at times a client will ask us to go through their policy document to highlight what they have....”
    15 hours ago by Mark Ogden
  • Another record profit for a bank
    “Useful to remember that the banks massively widened the margin between the OCR and floating mortgage rates during the GFC,...”
    2 days ago by AFA Muggins
Subscribe Now

Weekly Wrap

Previous News

MORE NEWS»

Most Commented On
Mortgage Rates Table

Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
AMP Home Loans 7.24 5.99 6.39 6.65
AMP Home Loans $200k+ 7.14 5.89 6.29 6.55
AMP Home Loans LVR <80% - - 5.85 6.29
ANZ 6.74 6.05 6.49 6.65
ANZ LVR > 90 6.74 6.55 6.99 7.15
ANZ Special - - 5.99 -
ASB Bank 6.75 6.09 6.40 6.65
ASB Bank Special - - 5.99 -
BankDirect 6.75 6.09 6.99 6.65
BankDirect Special - - 5.99 -
BNZ - Classic - - 5.99 6.25
Lender Flt 1yr 2yr 3yr
BNZ - GlobalPlus 6.74 5.99 6.39 6.59
BNZ - Mortgage One 7.15 - - -
BNZ - Rapid Repay 6.74 - - -
BNZ - Std, FlyBuys 6.74 5.99 6.39 6.59
BNZ - TotalMoney 6.74 - - -
Credit Union Auckland 6.70 - - -
Credit Union Baywide 6.45 5.90 6.50 -
Credit Union North 6.45 - - -
Credit Union South 5.75 - - -
eMortgage 6.04 6.15 6.69 7.19
Finance Direct 6.10 6.45 6.69 7.10
Lender Flt 1yr 2yr 3yr
First Credit Union 6.45 - - -
General Finance 5.95 6.25 6.50 7.10
HBS Bank 6.15 5.85 5.99 6.25
HBS Special - - - 5.95
Heartland 6.45 6.75 7.00 7.60
Heretaunga Building Society 6.25 5.85 6.50 -
Housing NZ Corp ▲6.74 ▼5.99 ▼6.19 6.60
HSBC Premier 6.84 5.95 ▼5.95 ▲6.55
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 6.75 5.99 6.39 -
Lender Flt 1yr 2yr 3yr
Kiwibank 6.40 5.99 6.39 6.65
Kiwibank - Capped 5.65 6.50 - -
Kiwibank - Offset 6.30 - - -
Kiwibank LVR > 80% - - 5.99 -
Liberty 5.64 - - -
Napier Building Society 5.80 6.00 6.70 -
Nelson Building Society 6.95 6.15 6.60 -
NZ Home Loans 6.85 6.09 6.40 6.65
Perpetual Trust 7.70 - - -
RESIMAC LVR < 80% 6.59 ▲6.35 ▲6.58 ▼6.77
RESIMAC LVR < 85% - - - -
Lender Flt 1yr 2yr 3yr
RESIMAC LVR < 90% - - - -
RESIMAC LW DOC - - - -
SBS Bank 6.15 5.85 5.99 6.25
SBS Bank Special - - - 5.95
Silver Fern 5.95 6.10 6.55 7.05
Sovereign 6.85 6.09 6.40 6.65
Sovereign Special - - 5.99 -
The Co-operative Bank 6.70 6.00 6.00 6.25
TSB Bank 6.74 6.00 6.19 6.60
TSB Special - - 5.80 -
Wairarapa Building Society 6.20 5.75 5.95 -
Lender Flt 1yr 2yr 3yr
Westpac 6.59 6.09 6.39 6.65
Westpac - Capped rates - 6.74 6.99 -
Westpac - Offset 6.59 - - -
Westpac Special - - 5.99 -
Median 6.64 6.03 6.39 6.65

Last updated: 22 August 2014 10:14am

News Quiz

Pathfinder's monthly commentary questions whether world equity markets are in bubble territory given the S&P500 has done what since "the grim days of early 2009"? Their answer is worth reading!

increased 139%

increased 93%

increased 39%

increased 19%

increased 193%

MORE QUIZZES »

About Us  |  Advertise  |  Contact Us  |  Terms & Conditions  |  Privacy Policy  |  RSS Feeds  |  Letters  |  Archive  |  Toolbox
 
Site by PHP Developer and eyelovedesign.com