GST on sale between investors

[patmat-co-nz]

A couple weeks ago I attended a GRA seminar where John Rowe explained the GST changes when a GST-registered investor buys a property from a GST-reg vendor.

As I understood it under the new rules the GST on such a sale is 0% and therefore the sale price has to be adjusted, i.e. instead of buying for $345k and getting 15% GST back ($45k) a sale between GST-registered investors should be for $300k and no GST is returned. Therefore it is important to know who you are buying from - if the vendor is GST registered he must remove the 15% GST from the sale price. Did I get it right?

John Rowe also mentioned there are some ADLS S&P add-on forms used to certify the GST position of both the buyer and the seller. I can't find them on the ADLS site. Are these now part of the standard S&P forms or can I buy them separately?

[Tan]

What business are you talking about? - I assume it's not straight residential tenancy

[patmat-co-nz]

I'm talking about property trading, buy & do-up & sell.

Residential tenancy (buy & hold) is GST exempt.

[Ivan McIntosh]

In that situation, you have to adjust the sale price in negotiations...ie before you sign on the dotted line, not after.

Whatever price is now on the agreement whether GST inclusive or exclusive, is going to be what you pay...there won't be anyone doing any price adjusting or removing as there is now nothing to adjust or remove (0%, remember).

So if you want the price to reflect the fact that GST is zero rated, you need that discounted figure written in right from the start before you sign. Which, if the vendor was intending to sell on GST exempt and were not expecting to have to account for 15% GST in any event, may be a bit of struggle.

I hope I have understood you correctly here; it was a bit of a puzzle.