GST on LHFAP payments received by body corporates

IR has issued a Commissioner’s Statement CS 20/05, with respect to the GST treatment of payments received by a GST registered body corporate from the Ministry of Business, Innovation and Employment (MBIE) under the Leaky Homes Financial Assistance Package (FAP).

Under the FAP scheme, MBIE makes payments to eligible claimants as a contribution towards the repair of their leaky property.

It is considered that a payment under the FAP scheme from MBIE to a body corporate is not a payment in respect of any actual supply of goods and services made by the body corporate in return for that payment. However, these payments are in the nature of a grant or subsidy from the Crown under section 5(6D) of the Act, and therefore are deemed to be in response to a supply from the body corporate.

Consequently, a GST registered body corporate which receives such payments is therefore obliged to include the GST component in its GST return and to pay for any net GST output tax.

This article from the 'A Week in Review' newsletter was originally published Monday 5th October 2020. If you have any questions or would like a second opinion on any national or international tax issues, please contact me [email protected]. 

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