Vendor's GST status

Question from John updated on 16th September 2014:

I'm buying a motel that has been used as a rental property without the usage being changed after purchase. Can I change the usage to short-term rentals and claim the GST back off the purchase price?

Our expert Mark Withers responded:

John, if the vendor is unregistered for GST and you intend using the property in a taxable activity of short term letting you will be able to seek a GST refund via the second hand good provisions. If however the vendor is registered and the property Is in their taxable activity the GST will be charged at zero rate under the new compulsory zero rating rules. Care is needed in this situation because an acquisition inclusive of GST but zero rated leaves you with no further claim. I can't emphasise enough the importance of gaining written confirmation of the vendors GST status before you start negotiating.

Mark Withers and his team at Withers Tsang & Co specialise in advising on property related transactions, valuation and restructure services and tax planning.

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