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GST on Holiday Home

GST on Holiday Home

Queenstown has many holiday homes and Airbnb operators who provide short term rental (less than 4 weeks). If your annual short term rental exceeds $60,000.00 a year, you are deemed to be a GST registered person because you are providing what is known as a taxable supply.

This applies whether you are an individual, trust, partnership or company. The threshold is also based on the combined short term rental. For example, the entity may have 2 or more short term rental properties and the combined turnover exceeded $60,000.00. Then you are obliged to registered for GST.

What does this mean for you?

• If you exceed the threshold, all your holiday home and Airbnb rents received are subject to 15% GST;
• You can claim GST on all goods and services purchase for your holiday home business use;
• You can claim GST on the total purchase price of the property if your intention is to provide a taxable supply, you register for GST before settlement, and you or anyone related to you are not going to reside in the property;
• The GST rate can be zero if the vendor is also GST-registered;
• If you purchase land from a registered person and your intention is to provide a taxable supply after you complete construction of a building on the land you can also claim GST on the building cost;
• When you sell the property, you have to return GST on the selling price to IRD, unless you sell to a GST-registered person whose intention is also to provide a taxable supply.
In the standard Agreement for Sale and Purchase, the GST information schedule can be easily overlooked, and the purchaser may change his intended use of the property before settlement. It is always important to have a clear intention and correct tax position to avoid future hassles.

Limitation applies to purchase from an associated entity.

If you are an overseas person and have OIA consent or exempted from OIA, it also applies to you as a non-resident GST business claimant.

If you have any queries about any of the above, please contact us.

Do you need to pay Residntial Land Withholding Tax when you sell your property?

RLWT – Residential Land Withholding Tax

The Brightline test was introduced by the IRD a few years ago. Very few people understand how RLWT works. Here are some tips for all.

When you sell a property within the Brightline test period or by an offshore RLWT person, the vendor is required to pay RLWT, unless the following exemptions apply:

• Transfers of inherited property to and from an estate executor;
• Transfer of relationship property;
• When a valid certificate of exemption is in hand where there is a main home exemption or you are a developer who meets certain criteria. (IR1103)

Who is responsible to withhold the tax?

The obligation to pay RLWT primarily is with the vendor’s conveyancer or solicitor.

If the vendor does not have conveyancer or solicitor, then the purchaser’s conveyancer or solicitor is responsible to pay.

If neither party has a conveyancer or solicitor, the obligation to pay RLWT rests with the purchaser.

The conveyancer and solicitor is not liable for RLWT, but may be liable for penalties. If Vendor and the purchaser are associated, the purchaser becomes liable for RLWT.

What is the amount to be withheld?

The amount of RLWT that needs to be withheld will be the lowest of:

• 33% (or 28% if the vendor is a company) x (current purchase price less vendor’s acquisition cost)
• 10% x the current purchase price;
• Current purchase price less outstanding local authority rates less security discharge amount.

Current purchase price is the price the land is being sold for.

For Example: Joe Wong (a Hong Kong resident) invested in rental property in Queenstown:
• Property purchased for $800,000 in Nov 2017
• Property is being sold for $1,200,000 in July 2019
• Outstanding mortgage of $500,000
• Outstanding Rates of $1,800

The RLWT will be lower of
 33% x ($1,200,000-$800,000) = $132,000, or
 10% x $1,200,000 = $120,000, or
 $1,200,000 - $500,000 - $1,800 = $698,200

Therefore, $120,000 needs to be withheld and paid to IRD.

When does RLWT needs to be paid?

RLWT must be paid before any disbursements are made at the time of the settlement.

For more enquries, please contact us.

IRD Risk Review and Audit

WARNING: If you have ever received a Risk Review letter from the Inland Revenue Department (IRD), please don’t ignore it. It may eventually trigger an official Audit and result you stress both mentally and financially.

A Risk Review letter from the IRD means some information from your compliance record suggests there could be something wrong that concerns Inland Revenue. Maybe you are in a certain industry that IRD is targeting on or the filed tax return did not stack up.

If you believe there could be a mistake or error in the financial record filed, usually it can be resolved with a fully and frank Voluntary Disclosure before triggering an offical IRD audit. Also taxpayer is entitled to a reduction in shortfall penalties up to 100% by doing so.

You could also possibly apply for relief from tax debt under certain circumstances or installment arrangements.

I am a Tax Specialist with extensive legal and accounting background based in Queenstown. I specialise in dealing with IRD for risk review and Audit on your behalf. I can prepare and file Voluntary Disclosure, represent you in the IRD meetings, dispute with IRD during the audit process and negotiate for settlement.

Please call today for a Confidential Consultation! 0800 222 TAX (829)

GST Change of Use Rule


It is quite often in reality, when the goods or assets (over $5000 (GST exclusive) you previously purchased for private use or business use before registering GST have been subsequently used in making taxable supplies.

When a person was not a GST registered person and becomes registered person, the goods and assets purchased prior registration is now solely or partly used for the purpose of making taxable supplies. Then the GST Change of Use Rules apply, s 21B of the Goods and Service Tax Act 1985 (the Act).
This rule gives you opportunity to have a claim the GST input portion you have previously paid when you are not registered for GST. Adjustments can be used to claim the GST, the number of adjustments to be used are dependable on the original purchase price:

• $5,001-10,000 – two adjustments periods
• $10,001 – 500,000 – five adjustments periods
• $500,001 or more – ten adjustments periods

The First adjustment period starts on the actual date of acquisition of the goods and services and ends on the first balance date.

For example (to simplify the calculation, we assume the asset is solely 100% used for the business, there is no private use):

1. John was not previously registered for GST becomes
registered on 1 April 2019;
2. He purchased a boat from Rayglass in NZ on 1 Oct 2018 for $345,000.00 (GST inclusive);
3. The Boat is now 100% used for charters from 1 Apr 2019;
4. Then in his GST return for the period ended 31 March 2020 the GST input credit would be available (assume his is registered for 2 monthly GST), the GST credit is:

a. GST portion of the asset x No. of taxable periods used for making taxable supplies / number of taxable period owned
b. $34,500 x 6/9=$23,000

Further subsequent adjustments can be made for the balance of the GST paid s21 FB (2) of the Act. The longer time you owned assets, the small portion of GST you may be able to claim in your first adjustment, For the same case if John purchased the boat in 1 Oct 2017, then the GST input calculation would be $34,500 x 6/15= $13,800

When the Boat is subsequently sold, John is required to pay GST only on the portion of the sale proceeds 21F (2). The formula to calculating the GST on the sales can be complicated in this scenario.

You are also required to make adjustment when you have a private use portion mixed with the business use. If you are interested in finding out more, please contact us.

Tax Seminar for AIA Insurance, Auckland

It was a great pleasure to run a tax seminar for AIA Insurance, and very happy to know more new friends and catch up with old pal. The seminar is about: Income & Deduction allowance, Property Investor vs Property Trader/Dealer. It was quite a successful seminar and thank you for all who made it on that day. If you would like a soft copy of the Powerpoint, please email me for more details.

Jerry Li