IRD wants to make fund management fees exempt GST

Currently, most fund managers pay GST on 10% of the funds they manage because that was the estimated component that constituted “investment advice.”

However, KiwiSaver managers generally don't pay any GST on their fees because retirement savings vehicles are exempt, while over time, some other managers have applied GST to 100% of their fees.

While providing financial services is exempt from GST, providing investment advice is liable for GST, as is administrative services farmed out to a third party, such as registry services.

However, when a fund manager farms out investment management services to a third party, whether or not GST should be applied to fees paid for those services will depend on the terms of the external manager's appointment, IRD says in its draft exposure on the subject.