Clarified GST status of novated futures contracts

The Inland Revenue Department (IRD) has issued a "clarification" of its earlier stance on the GST status of novated futures contracts.

An earlier statement on novation - i.e. where there is a third party interposed between the two original parties to the contract - "arguably suggested that where a futures contract was novated, GST might be chargeable," says a note in the IRD's latest tax information bulletin.

That is not so, apparently.

The statement is included in a more general comment on the GST status of futures contracts.

In advice attached to its latest Tax Information Bulletin, 'Questions We've been asked" the department says futures contracts that are cash settled, provide for a physical delivery of some other commodity also exempt form GST, or provide for delivery of money, are all GST exempt.

On the other issues around futures contracts, the department advises that provision or assignment of a futures contract is a financial service (and thus exempt from GST) where  it:

• Does not provide for physical delivery of a commodity; or
• Provider for the physical delivery of a commodity exempt from GST; or
• Provides for the delivery of money."

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