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.
Given the value of properties in New Zealand, GST issues can have a big financial impact on a property 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 Ltd. at info@kempsolicitors.co.nz or 09 412-6000.