Misc

Property problems: Industrial trust's sales tax on holiday home

Q. I am the trustee of a family trust. The trust has industrial property income and is registered for GST. Several years ago the trust built a house to be used as a holiday home for the beneficiaries. The house was only for private use and did not produce an income, and therefore a GST refund was not claimed on the construction or maintenance cost. The trust now wishes to rent the property

Monday, June 14th 2004

for short-term stays to produce income on which GST will be added. The beneficiaries will not use the property in the future as the trust has acquired another property for their use. It is intended to incorporate the rental income and GST from the house with other income and deduct any GST paid for management, repairs, etc. In the future, if the house is sold for a much higher price than construction costs plus GST, how does the trust address the issue of GST, i.e. does the trust claim all GST refund now on the cost of construction or have the house valued now and only pay GST on the increase in value when the house is sold?

A. For GST purposes, renting the house for short-term stays will mean it is a "commercial dwelling" and therefore the trust is correct in recognising that General Sales Tax will need to be accounted for on the rent receipts.

When a person acquires goods and services (on which GST was charged) other than for the principal purpose of making taxable supplies, no GST input tax credit may be claimed.

However, to the extent that those same goods and services are later applied in the making of taxable supplies, a GST input tax credit can be claimed based on the lesser of the GST inclusive cost of those goods and services or their open market value.

Read More - Opens in a new window

Most Read

SBS FirstHome Combo 4.29
Unity First Home Buyer special 4.29
Co-operative Bank - First Home Special 4.85
China Construction Bank 4.85
ICBC 4.85
TSB Special 4.89
Kiwibank Special 4.89
ASB Bank 4.89
Westpac Special 4.89
BNZ - Std 4.89
AIA - Go Home Loans 4.89
Nelson Building Society 4.93
ICBC 4.95
SBS Bank Special 4.95
China Construction Bank 4.95
Wairarapa Building Society 4.95
TSB Special 4.95
ANZ Special 4.95
ASB Bank 4.95
Kainga Ora 4.95
Westpac Special 4.95
AIA - Go Home Loans 4.95
SBS Bank Special 5.39
Westpac Special 5.39
ICBC 5.39
Co-operative Bank - Owner Occ 5.59
BNZ - Std 5.59
BNZ - Classic 5.59
AIA - Go Home Loans 5.59
ASB Bank 5.59
Kainga Ora 5.69
Kiwibank Special 5.79
ANZ 5.79
SBS Construction lending for FHB 3.94
AIA - Back My Build 4.44
CFML 321 Loans 4.99
Co-operative Bank - Owner Occ 5.95
Co-operative Bank - Standard 5.95
Heartland Bank - Online 5.99
Pepper Money Prime 6.29
Kiwibank - Offset 6.35
Kiwibank 6.35
TSB Special 6.39
Kainga Ora 6.44

More Stories

Four decades of 6-7% yearly house price growth ending

Friday, March 21st 2025

Four decades of 6-7% yearly house price growth ending

New Zealander’s reliance on property capital gains in the mid-single digits is at an end.

[TMM Podcast] Yelsa serves up “marine reserve” of property buyers

Friday, January 31st 2025

[TMM Podcast] Yelsa serves up “marine reserve” of property buyers

It’s been years in the making and former real estate agent Mike Harvey is now coming to market with his platform matching buyers and sellers, an offering he says will be a gamechanger for the industry.

Leaving last year's stumbling housing market behind

Friday, January 17th 2025

Leaving last year's stumbling housing market behind

As interest rates ease and job losses climb, New Zealand’s housing market faces a mixed year of modest growth, with conflicting forces shaping the outlook for homebuyers and investors.

Don’t bet on house prices rising faster than incomes

Wednesday, January 15th 2025

Don’t bet on house prices rising faster than incomes

Former Reserve Bank Governor and National Party leader Don Brash says there are grounds for believing that house prices may finally have ended the three-decade period when they rose significantly faster than incomes.