Commercial Property and GST

[Aston]

I am considering the purchase of a retail commercial property and I am not currently GST registered. The tenant pays his rent plus GST and I understand that I will need to become GST registered and this GST component will be passed onto IRD.

I will be buying this new property in a different entity to another commercial property that I already own, where the GST is not passed onto IRD because I am currently under the $60,000 threshold with this property.

Will the purchase of my new property have any GST implications on my existing property, despite being in a different entity.

Of course I will get advice from an accountant but just interested in opinions of others.

[Davo36]

I think if you are receiving rent plus GST of any amount, you have to forward that GST onto the goverment don't you?

Only if you don't charge for GST on the rent are you ok there.

And then once you pass the $60k threshold, then you must charge it and forward it on.

[Scouser]

I think that's very much an 'it depends' answer. In theory each entity has its own GST threshold requirement and no problem. But the IRD can, at its own discretion, decide that you've constructed your affairs in such a manner as to avoid tax and determine you are thus liable. This is much more likely if we are talking companies with the same shareholders and directors, especially if it's only, say, you and your partner are the shareholders. If there is a well justifiable reason for separate entities then you're on solid ground.

If it's a partnership then I think your proportion of the revenue is added up against your own revenue and it's whether your individual revenue breaks the $60K barrier that matters.

Trusts are probably safer so long as the beneficiaries of the trust are different.

I'm not an accountant and so could be wrong.

[Beano]

I am considering the purchase of a retail commercial property and I am not currently GST registered. The tenant pays his rent plus GST and I understand that I will need to become GST registered and this GST component will be passed onto IRD.

I will be buying this new property in a different entity to another commercial property that I already own, where the GST is not passed onto IRD because I am currently under the $60,000 threshold with this property.

Will the purchase of my new property have any GST implications on my existing property, despite being in a different entity.

Of course I will get advice from an accountant but just interested in opinions of others.

If you charge GST you must pass it on to the IRD
I don't understand why you are not registered
Once you are registered you can claim the GST component of your expenses
If the tenant is registered for GST you both will be better off

[Aston]

If you charge GST you must pass it on to the IRD
I don't understand why you are not registered

The original post is not quite correct. I am not forwarding GST to IRD because I am not charging GST, also I am under the threshold and have chosen not to become registered.

The question in the first post remains.

[Nick G]

Have you received advice from an accountant and want to check it here? My guess would be that if it pushes you over the threshold then them's the breaks. Most others will have an understanding. There are only about 3 active commercial investors and a couple of accountants on here. Why not save yourself a bunch of time and pay for 15 minutes with your accountant on the phone?

[Anthonyacat]

The question in the first post doesn't 'remain', it was answered by Scouser.

As Scouser has said, the threshold of $60k technically applies per entity, not overall, but the IRD has the ability to look through your companies and deem your entire structure tax avoidance if that's why you're doing it.

Two companies, one registered and one unregistered? Unlikely to be a problem. Especially if there's a good reason you want to keep them separate, such as the risks of a commercial tenancy going bad. But don't go crazy with it. And as always, it depends.


But coming back to what Beano has said, if your tenant is registered, they would be no worse off if you registered for GST, and you'd be better off as you can then claim the GST on your expenses.

If your tenant isn't registered, I can see why you'd choose to stay unregistered - for example, my AirBnB property, if over $60k would require GST registration, but it's not and my tenants generally won't be registered, so I choose not to.

[Beano]

The question in the first post doesn't 'remain', it was answered by Scouser.

As Scouser has said, the threshold of $60k technically applies per entity, not overall, but the IRD has the ability to look through your companies and deem your entire structure tax avoidance if that's why you're doing it.

Two companies, one registered and one unregistered? Unlikely to be a problem. Especially if there's a good reason you want to keep them separate, such as the risks of a commercial tenancy going bad. But don't go crazy with it. And as always, it depends.


But coming back to what Beano has said, if your tenant is registered, they would be no worse off if you registered for GST, and you'd be better off as you can then claim the GST on your expenses.

If your tenant isn't registered, I can see why you'd choose to stay unregistered - for example, my AirBnB property, if over $60k would require GST registration, but it's not and my tenants generally won't be registered, so I choose not to.

This all correct
If you have any deductible expenses that contain GST you can claim them WHEN you are GST registered
The question we have is the tenant gst registered?

[nzmikey]

If you are not GST registered. You'll need to pay the GST on top of the price advertised to the vendor. If you were GST registered then there is no transfer of GST. As you would claim it back in your return and they would have to pay it their return.

The current tenant would continue to pay you the lease based on an invoice you provide them without GST attached. It is no different for them as the GST has no bearing on their costs. They will require an invoice though to be able to claim it as a tax deductible expense.

*I am not an accountant or lawyer. Nor do I have a university degree so best of luck