Land Transactions - Zero Rated GST
Land transactions between GST registered persons is Zero rated for GST from 1st April 2011 providing the purchaser:
- Provides a written statement that the land is to be used in a taxable activity
- Is GST registered
- The land is not to be used as a principal place of residence by the purchaser or any person associated with them
- This also includes business assets sold with the premises such as plant and machinery.
This has the great benefit of not having to finance the GST while you wait for a refund from the IRD.
Things to do:
- Pricing will be 'plus GST if any' in the purchase agreement
- Vendor needs written statement showing purchaser's GST registration status and intentions for the lands use.
- There is a new schedule, schedule 2 in the standard sale agreement that documents to GST infomation
- GST registration status is important on settlement date rather then unconditional date.
Things to watch out for
GST registration status may be difficult to determine for purchasers nominees
GST position changes before settlement date - if purchaser or nominees become unregistered before settlement date than GST would be charged.
GST Apportionment rules
Previously for goods and services acquired that have an exempt or personal portion, GST tax adjustments were made continuallly. New rules now imply a one-off adjustment is made at time of purchase.
There will be a special 'wash-up' adjustment at time of sale, deregistration, or when a portion of the asset's used for taxable supplies varies.
Return to Tax Changes