Agent Commssion on Apartment Sale - Claim GST Credit, Expenses to Nett Off Income?

[RayL]

Hi,

I Bought a zero rated apartment, and also sold it zero rated to another GST registered buyer. For the GST paid to the agent, can I claim GST credit for it i.e consider the agent commission as part of the 'Purchases and Expenses? The GST portion of the commission exceeds the gst on the rental collect (the amount that I need to submit for the GST return. If the commission gst can be considered as GST credit, does it mean the IRD will pay me back the difference?

Also, is the sale commission be considered as part of the expenses of the business? If yes, the commissioned paid is more than the rental collected - so no income tax. Am I correct on this?

Appreciate advice on the above. Thank you very much.

[Anthonyacat]

Hi,

I Bought a zero rated apartment, and also sold it zero rated to another GST registered buyer. For the GST paid to the agent, can I claim GST credit for it i.e consider the agent commission as part of the 'Purchases and Expenses? The GST portion of the commission exceeds the gst on the rental collect (the amount that I need to submit for the GST return. If the commission gst can be considered as GST credit, does it mean the IRD will pay me back the difference?

Also, is the sale commission be considered as part of the expenses of the business? If yes, the commissioned paid is more than the rental collected - so no income tax. Am I correct on this?

Appreciate advice on the above. Thank you very much.

Hi Ray

You can claim the GST on the agents fee in your GST return. If the overall GST in the return is a credit (ie, GST paid is greater than GST charged) then yes, the IRD will send you a cheque or bank transfer for the difference.

But the sale commission is not part of the expenses of the business, it is a "capital item" and is effectively treated as selling the property for a lower amount.

As an aside, if the property is caught by the bright line test, or you purchased the property with the intention of selling it, and so are required to pay tax on any profits you make, then the capital items are taxable/deductible anyway.

[RayL]

Hi Anthonyacat,

Thanks for your explanation. It is very helpful.

Regards

[eri]

another question on zero rated apartment gst calculations if possible

my understanding is that the earnings attract gst that must be calculated 6 monthly and sent to ird

say 6 months earnings in a hotel pool of $6000

6 months rates paid of $500

6 months BC levy paid of $1200

so $6000 - $1700 = $4300 x 0.15 = $645 to be sen to ird

does that look about right?

and the 6 months interest on loan to buy property of $5000

is only factored in to the year end tax return?

[Lovethiscountry]

Hi eri,

Yes your reasoning is pretty much correct if you are GST registered for six monthly payments.


However to work out the GST payable multiply the $4,300 by 3 than divide by 23 = $560.87

[Rosco]

Hi,

I Bought a zero rated apartment, and also sold it zero rated to another GST registered buyer. For the GST paid to the agent, can I claim GST credit for it i.e consider the agent commission as part of the 'Purchases and Expenses? The GST portion of the commission exceeds the gst on the rental collect (the amount that I need to submit for the GST return. If the commission gst can be considered as GST credit, does it mean the IRD will pay me back the difference?

Also, is the sale commission be considered as part of the expenses of the business? If yes, the commissioned paid is more than the rental collected - so no income tax. Am I correct on this?

Appreciate advice on the above. Thank you very much.

Hi RayL,

I presume the apartment is actually a taxable activity and you have been paying GST on your income and claiming GST on your other expenses like rates?

Otherwise if it was just a long term rental, or a personal house, then the purchase/sale shouldn't have been zero rated, and you also couldn't claim any GST on the commission.

Ross

[eri]

thanks Ltc