GST at fifteen per cent, net then gross

Goods and services tax in New Zealand runs at fifteen per cent, and on a construction payment claim it is the last thing that happens, not the first. The quantity surveyor values the work net, and only then does GST turn the net into the gross that changes hands.

Why net first matters

Every measurement, every rate, every variation is a net figure. Retention is deducted net. Cumulative build-up is net against net. Keeping the whole valuation in net terms means the arithmetic is clean and the deductions land where they should. GST is a single operation applied once the net position is settled.

• Value the work net. Work in place, materials, variations, all before tax.
• Deduct retention net. The retention comes off the net value, not the gross.
• Apply GST last. Fifteen per cent on the net amount due this cycle produces the gross.

The cumulative catch

Payment claims are cumulative, so each claim states the gross value to date net of tax, deducts what was previously certified net of tax, and applies GST to the net movement for the period. If GST has been baked into individual lines along the way, the previously certified figure and the current figure stop speaking the same language, and the tax on the period comes out wrong.

GST on the payment schedule

When the Engineer to the Contract issues the payment schedule in response, the scheduled amount carries GST on the same basis. If the payer schedules less than claimed, the difference is a net argument, and the fifteen per cent simply follows the net figure that is finally agreed. The tax is never the thing in dispute, the net valuation is.

The discipline

Show three numbers on the face of every payment claim: the net amount due for the period, the GST at fifteen per cent, and the gross. A payer can check a claim in seconds when those three lines are there, and a claim that is easy to check is a claim that gets a clean payment schedule back.