New Zealand Gym Memberships and GST

Fitness New Zealand has produced a consumer guide based on the increase in GST (Goods and Services Tax) from 12.5% to 15% on all goods and services as of 1st October.
With gym memberships covered by this change Fitness NZ has outlined how the change will affect those with existing gym memberships, as well as new memberships started after 1st October 2010.
So, what does this mean for those with existing gym memberships or about to buy one?

New gym memberships after 1st October 2010

Anyone starting a new membership (or renewing their existing membership) after 1st October 2010, will have GST of 15% applied to the entire membership, and all payments.

All gym memberships started before 1st October 2010

Any payments you make before 1st October 2010 will be at the old rate of 12.5%. This applies to both lump sum payments, and if you are paying ongoing weekly/fortnightly. Any payments made after 1st October 2010 will be at the rate of 15% GST, regardless of when you first started your membership, and apply to both lump sum memberships and ongoing weekly/fortnightly payments.

Increases to existing memberships

Will my membership go up on 1st October 2010?

Gyms are required by law to charge GST at the rate of 15% from 1st October 2010 onwards. For most people, this means any payments on existing membership agreements will rise by 2.2% for all payments made after 1st October. If your gym chooses not to increase your payments, then this means in effect they are giving you a discount of 2.2%, as they still need to pass on GST at the rate of 15% to the Government (Inland Revenue - IRD).

If you are paying by direct credit or AP, gyms will advise you of any change, and when the new payments will start. If your gym uses a third party to collect the payment for them, then the third party will advise you of the changes.

Can I avoid the increase to 15%?

The law is clear on this one â any payment on existing memberships made before 1 October is subject to GST at the rate of 12.5%, and payments on a membership after that date are at the rate of 15%. Unfortunately a recent newspaper article incorrectly reported that gym memberships were exempt from the increase â this is not true.

The GST rules specifically allow for businesses to put up the prices for existing and new customers, even those with written agreements with a set price. A reminder that this GST increase has been offset by reductions in your income tax, so no one is worse off.

So, when should I get started into a new membership?

Overall the change in GST to 15% means a relatively small increase of around 50c a week on an average gym membership. For this reason, we advise members of the public to ignore the GST change when they are deciding when to start a new membership. The more important issue is ensuring you get good use out of your membership â so choose a gym that you feel comfortable at, offers the services and facilities that you want, and with a payment option that suits you â for most people this will be weekly/fortnightly payments.

For further information visit

http://www.ird.govt.nz/changes/gst/consumers/