[Global IDT Insights] New Zealand Issues Guidance on Second-hand Goods Input Tax Deduction under GST

Editorial Team – [2025] 180 taxmann.com 862 (Article)

Global IDT Insights provides a weekly snippet of tax news specifically related to Indirect Taxes from around the globe.

1. New Zealand Issues Guidance on Second-hand Goods Input Tax Deduction under GST

New Zealand has issued a fact sheet summarising the requirements for claiming a second-hand goods input tax deduction under GST. The guidance explains the conditions that must be met for a registered person to claim a notional input tax deduction when purchasing second-hand goods. It addresses the eligibility of goods, the nature of the supply, payment obligations, record-keeping requirements, and relevant exceptions.

The fact sheet also provides clarification on definitions, the scope of second-hand goods, and limitations that apply to certain scenarios. It is focused solely on GST considerations and establishes the procedural requirements for claiming a second-hand goods input tax deduction.

Key aspects of this guidance include

(a) Registered person is the only eligible claimant – Only a person registered for GST is entitled to claim a second-hand goods input tax deduction. Registration is a mandatory condition and forms the basis for determining eligibility. In the absence of registration, a person is not permitted to claim the deduction, irrespective of the nature of the goods acquired.

(b) Only qualifying second-hand goods may be claimed – The goods acquired must meet the definition of second-hand goods, meaning they are previously used or previously owned. Goods purchased directly from a producer, whether through a wholesaler, distributor, or retailer, fall outside this definition. The acquisition must also be for the purpose of making taxable supplies. Goods that do not meet these conditions cannot give rise to a deduction for second-hand goods.

(c) Only sales qualify as eligible supplies – The supply of goods must be effected by way of sale to enable the deduction. Supplies made by lease, distributions to or from the estate of a deceased person, and certain trust distributions or resettlements are specifically excluded. A compulsory acquisition may be treated as a sale for this purpose. Only supplies meeting the statutory meaning of sale can support the deduction.

(d) Goods must be in New Zealand and the supply must be non-taxable – At the time of supply, the goods must be located in New Zealand. The supply must not be a taxable supply, covering supplies made by unregistered persons, exempt supplies, supplies not made in the course or furtherance of a taxable activity, or supplies made outside New Zealand. These conditions operate concurrently. If either condition fails, the deduction is not available.

(e) Deduction limited to the extent of payment supported by records – A deduction is permitted only to the extent that payment has been made in the relevant taxable period. The amount paid determines the quantum of the deductible notional input tax. Adequate records must be maintained to substantiate the claim.

(f) Specific exclusions and limitations apply – The deduction is not available for goods acquired before 1 October 1986, previously-leased imported goods, or zero-rated financial services. These categories fall outside the statutory scope of the second-hand goods input tax deduction. The deduction may also be restricted where the supplier and recipient are associated persons. Such limitations must be applied as prescribed.

Source – Fact Sheet

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