Claiming gst on building costs

[thenztrade]

Hi

I am doing a feasibility calculation for my property purchase and have a few questions.

There's an old house on the section and i can demolish it and build 2 new houses on it. I intend to rent out the 2 new properties and will be buying this section under a GST registered company.

1. Can i claim GST on the purchase of the property?

2. Can i claim GST on the building costs of the 2 new houses?

Appreciate any advice/thoughts on this.

[Nick G]

Do you have an accountant? Check with them.

You can claim GST if your intent is to make taxable supply, ie you are buying with the intent to sell.

If you are buying to rent, the IRD has the ability to ask you to repay the GST you claimed. Actually you shouldn't claim it.

If this is a long term rental with no CGT in NZ (past 2 years) you are usually much better off skipping GST because not only would you have to pay GST on the profit whenever you sell you will also have to pay income tax on the profit.

[Anthonyacat]

If you're buying this to rent out long term, you shouldn't be claiming GST on anything, including the initial purchase price of the section - you should pay the price plus GST if the vendor is registered. This can get a little confusing when you're buying through a registered company also, because there's zero-rating, but you will need to end up paying the GST.

If you're buying to build a house and sell it on, you can claim GST on everything and you have to charge GST on the sale price when you sell.

If you build a house to sell, and end up renting it for a while, this can get very confusing. You can claim the GST on the costs while building, but not while it's a residential rental, and the rent should not have GST added.

[thenztrade]

If you're buying this to rent out long term, you shouldn't be claiming GST on anything, including the initial purchase price of the section - you should pay the price plus GST if the vendor is registered. This can get a little confusing when you're buying through a registered company also, because there's zero-rating, but you will need to end up paying the GST.

If you're buying to build a house and sell it on, you can claim GST on everything and you have to charge GST on the sale price when you sell.

If you build a house to sell, and end up renting it for a while, this can get very confusing. You can claim the GST on the costs while building, but not while it's a residential rental, and the rent should not have GST added.

Hi Anthony,

What happens if you built a house to sell originally and then changed the intention to rent out the houses, and the GST has already been claimed, do you need to pay back the gst?

[thenztrade]

Thanks Nick!

[Anthonyacat]

Hi Anthony,

What happens if you built a house to sell originally and then changed the intention to rent out the houses, and the GST has already been claimed, do you need to pay back the gst?

Yes, and it's an annoying and a little complicated accounting issue: http://www.ird.govt.nz/gst/additiona...ge-in-use.html

But you'll always have to pay income tax on your profits, because with the original intention to sell never goes away.