Everything you wanted to know about tax

Press, 12 August 1986, Page 22

Everything you wanted to know about tax

By

LES BLOXHAM,

travel editor

How wiH the goods and services tax affect you, the traveller, after October 1? This article was prepared with the assistance of the GST co-ordinating office and Air New Zealand.

International travel is going to be cheaper from October 1, but travel within New Zealand will be dearer.

When the goods and services tax is introduced on October 1, the existing $4O departure tax on international tickets will be abolished. As the 10 per cent GST will not apply to international fares, there will be a saving of $4O for all adult travellers and $8 for children. ?

Travellers heading overseas will also not have to pay GST on any component of an overseas trip, even if bought from a travel agent in New Zealand before departure. All travel within New Zealand, however, will attract the tax, thereby pushing up the. cost of domestic business trips and holidays. But the cost of existing domestic air fares will not go up by 10 per. cent: effectively the increase will be closer to 3 per cent. The reason is complicated.

Four years ago the Government introduced a 5 per cent domestic air travel tax which airlines were permitted to build into increased fares. This tax will be repealed at midnight on September 30 and the Government

wants to reduce their fares by that loading, which, in real terms, is about 6.5 per cent. Therefore on, October 1, domestic fares will be reduced by this amount before the 10 per cent GST is added. For example, the fare from Christchurch to Auckland now costs $lB6. From October 1 it will cost $192.50. ($lB6 less 6.5 per cent will make the fare $175 which will then.be subject to GST of 10 per cent.) Open-dated tickets bought before October 1 but used later will not escape the tax: it will be added when they are surrendered to the airline for a booking. y However, fixed-price tickets for nonreservable road, rail, and ferry services which normally do not specify the date of travel will only be taxed if bought on or after October 1. GST will add 10 per cent to the cost of all travel products and services

within. New Zealand — hotels, motels, rental cars, buses, white-water rafting, jet-boat trips, track fees and the charges for passports and visas to mention but a few. For instance, a $l2OO New Zealand holiday will be subjected to a GST charge of $l2O. •

Visitors from overseas will have the GST added to the cost of their holiday (excluding international air fares) at the time and place of purchase, a Unlike in some countries they will not be able to claim at the time of their departure, tax refunds on goods (for example, sheepskin products) bought from normal retail outlets in New Zealand. But GST will not apply to purchases made at duty-free shops. New Zealanders returning home

from an overseas trip will not have to pay GST on personal effects to a maximum value of $5OO. Anything above this value will be subject to GST on the basis of the Customs value of the goods for duty purposes. There will be no GST on the cost of travellers cheques because they are classified as a financial service. Likewise, fees charged by a credit card company for credit card services are PYPmnt Like international air fares, holiday travel-insurance premiums have been "zero-rated" — which means that the GST has been set at 0 per cent and will therefore cost the consumer nothing.

Cancellation fees will be taxable. For instance, if an intending traveller pays a $3OO deposit for a New Zealand holiday and then cancels at short notice, $3O GST would apply to the loss of deposit A comprehensive booklet on GST and the way it is to be applied to the travel and tourism industry was recently distributed to travel agents by the Travel Agents’ Association of New Zealand.

*but were afraid to ask

(with apologies to David Reuben, M.D.)