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What planning fees are subject to gst

IRD has clarified its thinking on the gst treatment of financial planning fees, two years after its last ruling expired.

Friday, August 10th 2001, 7:08AM

The Inland Revenue Department has finally come up with a new set of rules outlining which financial planning fees are subject to gst.

The original Interpretation Statement on the matter ceased to apply from March 31, 1999.

Fee category

Gst

Initial planning fees

Yes

Implementation fees

No

Administration fees

No

Monitoring fees

Yes

Evaluation fees

Yes

Re-planning fees

Yes

Switching fees

No

Over the past two years since then the department has come up with a draft, and now a final interpretation statement.

The key points are that the department has split financial planning fees into seven categories, three of these are not subject to gst and four are (see table).

IRD says in its statement that the question of gst treatment hinges on the actual nature of the service provided rather than the label applied to those services.

Under its earlier statement there had been some uncertainty as there were only three fee categories and they were not clearly defined.

In fact IRD lost several cases over fees that were taken to the Taxation Review Authority.

These revolved around whether making changes to an existing plan were subject to gst.

IRD now says gst doesn't have to be charged on implementation fees, but it does have to be charged on re-planning fees.

In an earlier draft of the fees statement the department tried also classifying investors into three categories - passive, speculative and business investors - but it has moved away from that idea.

IRD says that the seven categories it has adopted are "intended to make it easier for financial advisers and others to determine how fees charged and the services provided will be treated for gst purposes."

Related stories and information

Full copy of latest Interpretation Statement

IRD to change rules on planning fees

IRD loses another fees case

Fees deductible (this time)

« Conflict between advisers and investorsSovereign takes regulation bull by the horns »

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