Verified for 2026 Tax Year

Associated Persons & GST

Buying from your own company or family members? Master the strict "Open Market Value" and "Input Tax Limit" rules designed to prevent tax avoidance.

Transactions between people who are "associated" (e.g., family members, companies with common shareholders, or trusts and their settlors) are heavily regulated by the IRD to prevent tax avoidance.

The Core Principle: Open Market Value

You cannot artificially inflate a price to claim more GST, or deflate a price to pay less GST. The IRD has the statutory power to deem transactions between associated persons to have occurred at exactly the Open Market Value (OMV), regardless of what the invoice says.

Who is an "Associated Person"?

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Relatives: You are associated with your spouse/partner and children (within 2 degrees of blood relationship).
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Company & Shareholder: You are associated if the shareholder owns or controls more than 25% of the company's voting interests.
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Trust & Settlor: The person who set up the trust (the Settlor) is automatically associated with the trust.
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Two Companies: If the exact same group of people control more than 50% of both companies, the companies are associated with each other.

The Input Tax Limitation Rule

This rule is critical if you sell a private asset (like your personal vehicle) to your own GST-registered company.

You bought a car privately 3 years ago for: $10,000 (No GST involved)

Car appreciates. You sell it to your company today for $20,000

Standard Rule (Wrong)

Claim GST on $20,000 price

Claim: $2,608

Associated Person Rule (Correct)

Limited to original $10,000 cost

Claim: $1,304 Maximum

The Look-Through Exception

This limitation doesn't apply if the original owner (you) acquired the goods from a GST-registered person and claimed the GST back when you first bought it. But if you bought it privately (with no GST claim), the company inherits your "no claim" status for the appreciation portion.

Time of Supply Trap

Even if you pay fair market value, the "time of supply" rules differ for associated persons. Normally, a GST liability is triggered when the invoice is issued OR when payment is made. For associated persons, the liability is triggered the moment the goods are made available or ownership transfers, even if no money has changed hands yet.

Frequently Asked Questions

Who is considered an associated person for GST?

Associated persons include relatives (spouse, children within 2 degrees), a company and anyone holding over 25% of its shares, a trust and its settlor, or two companies controlled by the same group of people.

What is the Input Tax Limitation rule?

When you sell a private asset to an associated GST-registered entity, their GST claim is limited to the lesser of: the GST fraction of the purchase price, or the GST fraction of the original cost to you.

Can I sell an asset to my company for more than market value to claim more GST?

No. The IRD has the power to deem transactions between associated persons to have occurred at Open Market Value (OMV), preventing artificial inflation or deflation of prices for tax advantage.

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