Mixed use calculations

Lucy asks:
(updated on Tuesday, October 23rd 2018)

My question relates to GST on a mixed use commercial property. Our GST registered company bought a small commercial unit back in 1993 and has leased it to various businesses ever since. There is residential flat upstairs that was permitted for use by a caretaker but it has only ever been used as offices. The flat was existing when we purchased but I have no idea if the GST was apportioned for the commercial only and not for the residential part. I am still looking for the S+P documents. If it was not apportioned, would we be required to pay GST now that we want to start using the flat for a residence? We want to rent the flat to a related party and sublease the commercial area.



Our Experts Answer:

I can only assume you acquired the property zero rated which seems likely if you are unsure of the apportionment. Note - it’s always wise when buying a mixed use property to negotiate the split between the exempt supply of a residential portion and the taxable supply of the commercial portion. The supply of a dwelling is deemed to be a separate supply. If you have acquired the entire property zero rated and now seek to return the residential portion to exempt use there is a GST adjustment required to be made to IRD for the GST on the market value of the residential portion returning to exempt use.



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