GST apportionment method

The principal focus of the GST Act 1985 is on output transactions such as sales and input transactions such as purchases. The scheme of the Act, therefore, established that “the tax is transaction based” (C of IR v Databank Systems Ltd (1989)11 NZTC 6,093 at p 6,103 per Richardson J.

The GST Act contains two apportionment provisions splitting a supply which generates distinct GST implications. Section 5(14) specifies that a single supply can be split into zero-rated and fully taxable supplies. Section 10(18) enables a single supply to be split into taxable and non-taxable components. These two provisions, therefore, enable a single supply to be split into fully taxable/zero-rated/ non-taxable supplies. Output and input tax implications are then considered in relation to each separate supply. 

Disclaimer: The following answer necessarily sets out general principles only. The facts of particular cases always need to be considered carefully, and it may be necessary to obtain advice from a tax expert.

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