GST on Housing: Avoid Surprise Tax Bills

 

As we approach May 2024, it’s crucial to address potential GST pitfalls when selling property. Over the past decade, there have been instances where property sellers, unaware of GST implications, faced unexpected tax bills, especially those converting residential properties into holiday rentals or using them for business.

 

Thankfully, recent law clarifications provide relief. Registered persons can now elect certain assets outside their taxable activity, exempting them from GST on sale, provided input tax wasn’t claimed, and the goods weren’t primarily used for taxable supplies.

 

What if GST has already been claimed? Act now! A transitional rule (Section 91 of the GST Act) must be utilized before April 1, 2025. This rule applies to tangible assets, particularly properties.

 

When does the transitional rule apply?

 

  • Input tax credits were previously claimed or goods acquired as zero-rated supplies.
  • Goods were acquired pre-April 1, 2023.
  • Goods weren’t acquired for making taxable supplies.
  • Goods weren’t primarily used for making taxable supplies.
  •  

To comply, taxpayers must return output tax equal to previously deducted input tax or the nominal GST amount if the property was acquired as a zero-rated supply. The election must be made to the Commissioner by April 1, 2025.

 

Examples:

 

  • Output tax adjustment equal to previous deductions taken.
  • Dwelling with minor use in a taxable activity.
  • Business use of a home garage.
 

If GST wasn’t claimed on the purchase price but on operational costs, no repayment is needed. Act now to validate eligibility, calculate amounts owed, and consider Inland Revenue’s instalment arrangements. With April 1, 2025, looming, don’t delay as there will be no deadline extensions.

 

 

 

Your Outside Team

 

 

Need a bit of assistance with your business? Contact an Outside Accounting team member today and learn more about our fixed fees. You won’t regret it.

Aside from business consultation, we are business accountants Wellington who offer accountingbookkeeping, payroll services designed to help you achieve greater financial success.

You can click here to speak to a businessaccounting and bookkeeping firm. We will give you a call to know more about your needs. We will explain to you how we can improve your business. 

 

 

 

Contact 

Wellington Accountants | 

Business Accountants | 

Construction Accountants 

Property Accountants 

Contractor Accountants 

Hospitality Accountants |

 

Property Developer Accountants | Accountants Wellington | Wellington Accountant | Restaurant Accountants | Cafe Accountants | Business Consultation | Business Adviser | Accountants for Healthcare | Accountants for Trades | Accounting for Doctors | Accounting for Dentists | Accounting for Architects | Accounting for Engineers

AddressLevel 2, 182 Vivian Street,
Te Aro, Wellington 6011, New Zealand 

Mail: PO Box 24-457, Wellington 6142

Phone04 889 2975

 

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