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GST question for a Property Smartie

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  • GST question for a Property Smartie

    Big GST question for you smarties out there I have made my first sale in my trade company. I purchased a property that went unconditional 15-2-11 and within 13 days onsold in for a profit. They call this a "contemporaneous sale". both settlement dates are on 15-4 11. My only money outlay has been the $12,000 deposit on my unconditional purchase date 15-2-11. How do I claim gst of purchase and sale of this property???? My accountant confused me and wants $800 to do this one transaction..yikes!!! CAN ANYONE HELP PRETTY PLEASE Many many thanks....Grouse

  • #2
    Call IRD. They can tell you exactly what is required for free. It will either be 2 easy transactions supported by the S&P agreements, or none.


    • #3
      Hi Grouse,

      Well done.

      Are you intending on the company doing more trades? If yes, then it will be a GST activity. If no, it probably won't be, as not a continuous activity.

      I will presume yes, and I also presume the company is GST registered and probably payments basis.

      You need to treat the transactions as two different parts.

      So claim the expenses for the purchase

      For example
      - purchase property $200,000
      - Legal fees on purchase $1000
      - Valuation? $500
      - Inspection ? $500
      - Rates from settlement statement $400
      Total expenses $202,400

      Then return the sale, plus claim any expenses relating to the sale.
      - Sale $250,000

      - Legal costs $1,000
      - real estate fees? $5,000
      Total expenses $6,000

      So combining the sale and purchase you would have
      Sales $250,000
      Expenses $208,400

      Put these figures into the GST return, with any other income or expenses you have for the period.

      Book a free chat here
      Ross Barnett - Property Accountant


      • #4
        As tan suggested, IRD do give free support and assistance. Generally for new businesses such as yourself, an IRD trainer would meet with you and go through GST returns. All for free.

        Another option is to do the return, then get your accountant to check it. This would probably bring the cost down hugely.

        I would also think the $800 is a bit over the top! They might think this GST return requires more work, or that there are more transactions than there really are.

        Book a free chat here
        Ross Barnett - Property Accountant


        • #5
          Thank you x 1000's Rosco!! Yes it is on 2 monthly periodic payment basis and is gst registered, and yes yes to more activity. Now that breakdown is easy to follow and soooo useful (shame on my accountant) . Just to be sure, I file in the gst period that the settlement date occurs, not the unconditional date the deposit was paid?
          Great news on the IRD too, I will contact IRD to go over as you can never be too correct when it comes to the IRD.

          Your are a superstar *****


          • #6
            Hi Grouse,

            Generally with property transactions and GST, it is best to keep things simple.

            1) If you paid deposit in March, then technically you can claim back the GST. But as this is in IRD favour for you not to claim, they will have no issue if you claimed this in the April/ May period.

            2) If you received a deposit. Then this is income, and you NEED to return in the correct period.

            If I was you, and I paid the deposit in March, but didn't receive one, then I'd just return and claim everything in April / May, as it makes the return very simple and easy.

            If you did receive a deposit in March, then return this as income and claim any deposit paid, plus any other expenses. In the April / may return, you would then return the rest of the sale, and claim the rest of the purchase.

            Book a free chat here
            Ross Barnett - Property Accountant