GST can be one of the most confusing and complex aspects to deal
with in a property transaction. Every situation is unique, which is
why it is essential to obtain specific advice from both your
solicitor and tax adviser at the earliest opportunity. Prior to
drafting any agreement, the GST implications of the transaction
need to be considered fully, as this is one area where there are
serious consequences for both parties if it is not dealt with
Vendors: If you are registered for GST then it
is likely that you will need to return GST on the sale price of any
property however in most cases this will depend on the GST status
of the purchaser (discussed further below).
If you are not registered for GST but have been using the
property for some form of taxable activity (such as short term
rental or commercial leasing) then you need to be careful that you
are not deemed to be registered for GST due to your actions.
If you are in any doubt whatsoever as to your GST status as a
vendor then you should discuss this with your tax adviser and/or
If you are GST registered, or potentially deemed registered for
GST, then the safest course of action for you is to have the price
as being "plus GST (if any)" as this puts the obligation
to pay any GST onto the purchaser should GST be payable in respect
of the transaction.
Purchasers: As a purchaser, in order to be GST
registered to acquire the property, your purchasing entity will
need to be intending to carry out a taxable activity from the
property from settlement onwards. If so, you will need to then
obtain GST registration and a GST number prior to the settlement
date. You will also need to give confirmations to the vendor that
you are GST registered, that you intend to carry out a taxable
activity from the property, and that you do not intend to
personally reside at the property. If these confirmations can be
given and the vendor is also registered for GST then the sale of
the property should be zero rated for GST purposes.
If the price under the contract is "plus GST (if any)"
then as a purchaser, you will have to pay GST unless you can comply
with the above zero rating requirements.
There are certain instances where a residential property may be
included as part of a property being sold, with the balance of the
land being useable for a taxable activity. In this instance,
complicated and different GST rules apply. We can work these
through with you if the circumstances arise.
We see a huge number of mistakes made in contracts around GST.
Such mistakes can have significant financial implications for
either party so it is absolutely critical that the GST situation is
investigated and understood prior to a contract being entered
We at Cavell Leitch have considerable experience in this area of
property transactions and maintain excellent relationships with
specialist tax advisers with expertise in the area of GST. We would
be very keen to assist you with your next property sale or
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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