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GST and property sale

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  • GST and property sale

    Hi if you bought a property (no GST) and then rented it out and it turns out you are getting over 60k a year then you need to register for GST ...

    What happens when you then sell the property - will you have to pay GST on the profit from the property?

    Let's assume it is just under your normal names and not a trust or company etc.

    Sorry for being so ignorant.

    But thank you in advance.

  • #2
    https://www.classic.ird.govt.nz/prop...penses.html#04

    GST
    GST is not charged on residential rent. This means you don't show rental income in your GST return even if you are registered for GST for another taxable activity.
    When you claim your rental property expenses in your income tax return (IR3), you use the cost of the expense including the GST.

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    • #3
      ah i see, thanks.

      i am guessing then if you sold the property and make more than 60k, that profit under the brightline test also excludes GST?

      thanks

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      • #4
        You need to ask an accountant for advice.

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        • #5
          Hi,

          As above if normal long term residential, then no GST.

          But if airbnb or short term accommodation, then there is an issue. If income over $60k per year of short term accommodation, then IRD could deem that you should be GST registered if sell, then have to pay GST on sale of property. You might be entitled to some input claim, but this can be limited in many situations. This is a major issue and you need to watch out for this if doing short term accommodation.


          Ross
          Book a free chat here
          Ross Barnett - Property Accountant

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          • #6
            thank you again for the advice.

            if the property sells under brightline test and makes a profit over 60k is GST applicable?

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            • #7
              Originally posted by jack2016 View Post
              thank you again for the advice.

              if the property sells under brightline test and makes a profit over 60k is GST applicable?
              I would suggest getting some expert advice, as you are asking a lot of questions and answers always depend on your exact circumstances.

              For example, if this was really a trade, where you purchased a section and built 3 houses to sell, then would be a taxable activity, and would need to be GST registered.

              If a true long term hold residential property, and only way you are taxed is under the Brightline, then if the profit from sale is over 60k this has nothing to do with GST. So no GST would be due or payable.

              Ross
              Book a free chat here
              Ross Barnett - Property Accountant

              Comment


              • #8
                As above if normal long term residential, then no GST on the rental but there is GST on sale.
                (This is based on the purchase of the residential with no GST for example a transaction between two zero rated parties)
                It is important you get the correct advice. (I sold 4 properties where the purchasers accountant claimed there was no GST to be charged. After a lengthy discussion (& the full details were disclosed ) their accountants changed their views)
                Last edited by Beano; 10-10-2019, 08:03 AM.

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                • #9
                  Originally posted by Rosco View Post
                  I would suggest getting some expert advice, as you are asking a lot of questions and answers always depend on your exact circumstances.

                  For example, if this was really a trade, where you purchased a section and built 3 houses to sell, then would be a taxable activity, and would need to be GST registered.

                  If a true long term hold residential property, and only way you are taxed is under the Brightline, then if the profit from sale is over 60k this has nothing to do with GST. So no GST would be due or payable.

                  Ross
                  getting some expert advice, as you are asking a lot of questions and answers always depend on your exact circumstances ....this is the key ..

                  Comment

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