GST charged on rent?
Question from Gavin updated on 9th November 2012:
Can you please tell me if a property manager can, 'charge gst on the rents collected' and also charge the 8.5% management fee again on top of that? How does this work?
Our expert Megan Martin responded:
The Residential Tenancies Act 1986 (the Act) applies only to the relationship between landlords and tenants and does not cover the relationship between a property owner and a property manager. If you are a property owner, and would like information regarding your arrangement with your property manager (including what fees form part of your contract with your property manager), you may wish to seek independent legal advice from a lawyer or your local community law centre. If you are a tenant, the Act prohibits the payment of key money (which can include administration charges) as consideration for the granting of a tenancy. An exception to this is letting fees, which may be charged by a solicitor or a letting agent (such as a property management company) when granting or assigning a tenancy. This can include situations where a new tenancy agreement is entered into or where an existing tenancy has been assigned to a new tenant. The Act, however, does not specify an amount that may be charged in respect of a letting fee. If you are unsure what the fee specifically relates to, or whether the fee is considered a letting fee or not, you could discuss the matter with your landlord in the first instance. If an agreement is unable to be reached, you may apply to the Tenancy Tribunal to have the matter resolved. In any case, the Goods and Services Tax Act 1985 exempts certain supplies of goods and services from tax, including the supply of leasehold land by way of rental (not being a grant or sale of the lease of that land) to the extent that that land is used for the principal purpose of accommodation in a dwelling erected on that land. Also exempt is the supply of property by way of lease that is to be used for the principal purpose of accommodation in a dwelling by any person, other than a registered person in the course or furtherance of a taxable activity. For further information regarding GST, or the Goods and Services Tax Act, you can contact the Inland Revenue Department on 0800 377 776, or by visiting www.ird.govt.nz. To discuss your situation further, or for more information about the circumstances where letting fees may be charged, you can visit the Ministry of Business, Innovation and Employment – Building and Housing Group’s website (www.dbh.govt.nz), or call 0800 TENANCY (0800 836 262).
The Ministry of Business, Innovation and Employment provides information and guidance on building law and compliance, services including weathertight homes, and advice for tenants and landlords.