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  3. GST on secondhand goods

If a GST-registered business purchase secondhand goods from an unregistered person. An input tax credit can be claimed in these circumstances if the following criteria are met:

The recipient of the supply is a registered person;

  • It is not a taxable supplies;
  • The goods are situated in New Zealand;
  • The goods are supplied by a resident;
  • An input tax credit has not been claimed on the previous importation of the goods;
  • The goods are acquired for the principal purpose of making taxable supplies (s 3A(2));

If the supplier and the purchaser are not associated persons, the amount of input tax is the lesser of:

  • 3/23rds of the purchase price;
  • 3/23rds of the open market value of the supply (s 3A(3)(d)).

If the suppliers and the purchaser are associated persons, the amount of input tax is the lesser of:

  • The GST component (if any) of the original cost to the supplier;
  • 3/23rds of the purchase price;
  • 3/23rds of the open market value of the supply (s 3A(3)(a)).

Because the term ‘secondhand goods’ is not defined, it must take its ordinary meaning. However, the following are excluded: fine metal; goods made from any fine metal and livestock.

Land purchased from unregistered person, or in the course other than a taxable activities form a registered person, or the transaction is an exempt supply, an input tax credit can be claimed.