Don’t forget your GST entertainment expenditure adjustment
Tax Alert - April 2018
By Andrea Scatchard
In the rush to file income tax returns by the final deadline of 31 March, and working through the financial year end (if you have a March balance date), the need to make an adjustment for GST on non-deductible entertainment expenditure is easily overlooked. If your income tax return includes an adjustment for entertainment expenditure that is only 50% deductible, and you are GST registered, you will need to make an output tax adjustment in the GST return that covers the date on which you filed the income tax return. If for some reason you did not get the income tax return filed by 31 March, you still need to include the GST adjustment in the GST period covering 31 March.
The amount of the income tax adjustment is currently treated as a GST inclusive amount (even though it will actually exclude GST if your accounts are prepared on a GST exclusive basis) so the GST adjustment is calculated as follows:
Disallowed income tax deduction x 3/23 = GST payable
Further points to note are that the GST payable is not an allowable deduction for income tax purposes so you should ensure you can identify this cost in your accounts when it comes to preparing your next income tax return, and the calculation method changes for GST adjustments required after 1 April 2018. From this date the income tax adjustment is deemed to be a GST exclusive amount and the adjustment will be 15% of the disallowed income tax deduction.
If you have any questions regarding the GST adjustments you are required to make, please contact your usual Deloitte tax advisor.
April 2018 Tax Alert contents
- New rules for employers reimbursing employees’ mileage costs
- Inland Revenue issues the first Large Enterprises Update of 2018
- Don’t forget your GST entertainment expenditure adjustment
- Have your statutory filing obligations changed?
- Do you have assets used for making both taxable and non-taxable supplies?
- Tax Working Group – submissions are open
- A snapshot of recent developments