Paying GST when purchasing a property

Does it include GST or not?

When purchasing a property, the parties to the sale and purchase agreement elect whether the purchase price includes GST or not. A vendor such as a developer may be GST registered. Accordingly, the purchaser will liable for GST on the purchase price (unless the price is agreed to be GST inclusive). Zero rating can be a possibility where:

• The vendor is GST registered at settlement;

• The purchaser is GST registered at settlement;

• The purchaser (or any associated person) will not be using the property as a principal place of residence; and

• The purchaser will use the property to make taxable supplies.

Importantly, residential rental is not a taxable supply. Therefore even a GST registered purchaser may not claim the transaction to be a zero rated transaction.

We recommend that when buying or selling a property that you obtain advice on any tax issues before signing the agreement. For more information on this or any other legal issues contact Kemp Barristers & Solicitors at info@kempsolicitors.co.nz or 412-6000.