Understanding IS 25/21: What “Taxable Activity” Means for GST in New Zealand

Understanding (Interpretation Statement) IS 25/21: What “Taxable Activity” Means for GST in New Zealand

In October 2025, Inland Revenue (IRD) issued Interpretation Statement IS 25/21, providing updated guidance on the meaning of a “taxable activity” under New Zealand’s Goods and Services Tax (GST) Act 1985. For businesses, understanding this clarification is critical to ensure compliance and avoid penalties.

IS 25/21Published: December 2025

What is a Taxable Activity?

Under GST law, a taxable activity is any activity that:

1. Is carried on continuously or regularly,

2. Is conducted by a person (individual or entity), and

3. Involves, or intends to involve, the supply of goods or services for consideration.

Notably, the activity does not need to be profit-driven. Even non-profit or ancillary business activities may be classified as taxable if they meet these criteria.This definition determines whether a business:

• Must register for GST,

• Must charge GST on supplies, and

• Can claim GST on expenses.

Why IS 25/21 Matters

Before IS 25/21, guidance on what constituted a taxable activity was scattered and sometimes inconsistent. The new statement:

• Provides clear explanations of terms like activity, carried on, and continuously or regularly,

• Includes examples of real-world scenarios, helping businesses assess whether their activities are taxable,

• Reinforces that you cannot split a single taxable activity across entities to avoid GST registration thresholds (currently $60,000).

This means businesses need to carefully review their operations and ensure they are correctly registered if they meet the criteria.

Link:https://www.taxtechnical.ird.govt.nz/-/media/project/ir/tt/pdfs/interpretation-statements/2025/is-25-21.pdf?modified=20251023203446

Key Takeaways for Businesses

1. GST Registration is Triggered by Activity, Not Just Revenue
   Even if your turnover is below the threshold, if your operations qualify as a taxable activity, registration may still be required (Example:Expectation test- future turnover).

2. Non-Profit and Occasional Activities Can Be Taxable
   Supplying goods or services occasionally does not automatically exclude the activity from GST. What matters is the nature and intention of the supply.

3. Documentation and Compliance Are Crucial
   Maintain proper records of your activities, supply intentions, and payment considerations. This protects your business in the event of an IRD review.

4. Seek Expert Advice
   If your business has complex operations, multiple entities, or is considering splitting functions, consult a tax professional to ensure compliance with IS 25/21 and avoid unintended GST liabilities.

How We Can Help

At Metta Tax, we help businesses:

• Assess whether their activities constitute a taxable activity,

• Determine correct GST registration status,

• Implement compliance strategies to meet IRD expectations, and

• Navigate complex GST scenarios with confidence.

Understanding IS 25/21 is more than a technical requirement—it’s a crucial step in protecting your business from compliance risk. Contact us today to review your GST obligations and ensure your operations align with the latest IRD guidance.