Paying in instalments may hit people in pocket from October

People who opt to pay their insurance premiums in monthly instalments, or their rates quarterly, may have to fork out more than those who pay in a lump sum ahead of the GST rise on October 1, GST Advisory Panel chairman Frank Owen says.

The panel was set up to help businesses achieve a smooth transition when GST rises by 2.5 percent to 15 percent.

Mr Owen said the biggest concern was around the time of supply around long term contracts.

If people opted to pay their next local government rates bill as a lump sum they would pay 12.5 percent GST on the whole lot.

However, if they chose quarterly payments, they would pay 12.5 percent on the first quarter and 15 percent for the remaining three.

People on monthly insurance premiums would have to fork out an extra 2.5 percent GST on each payment from October, but if they paid in a lump sum before then, the whole premium would be taxed at 12.5 percent.

Problems could also arise with electricity and gas bills, holiday bookings, leases, lay-bys and hire purchases which overlap the October change over period, Mr Owen said.

Some insurance companies have up to 500,000 people paying in monthly instalments and the GST increase on many of them may only be 70 or 80 cents, he said.

"Maybe there's a way...with a tweaking of this legislation through this transition period (that) could get us over that."

One option was to pay all the GST up front before October 1, he said.

"That's an issue that we might have to look at. They're in the same position, it's just that one person is paying up front and one is asking if they can pay over 12 months."

Consumers would need to think carefully about what they were doing during the change-over period, he said.

There was a consumer boom when GST was introduced.

Revenue Minister Peter Dunne said that may happen, though to a lesser extent, with this increase. Some people may hold off making purchases until after the increase for clarity.

The advisory panel has a website and an 0800 number for those who can not get their questions answered by the IRD.

Mr Owen said the panel would not look at aspects of government policy, but rather provide technical assistance.

The panel had it first meeting late last week. It will now hold fortnightly meetings and post solutions to any problems on the new website.

The panel would also make suggestions to the Government about necessary changes to the legislation -- particularly technical or wording matters.

Mr Dunne said the panel was not "set up to be ignored", and the Government was likely to make any changes it suggested.

The Government would not be helping businesses to cope with costs, such as computer or physical prices changes needed, he said.

They were "part of the normal cost of doing business".

The advisory panel has a budget of $100,000.