Disclaimer:
This article provides general information only and does not constitute financial, legal, tax, or investment advice. Property investment involves risk. Always do your own research and seek personalised advice from qualified professionals before making investment decisions.
Key Takeaways
- There is no GST to pay on long-term residential rental income, and GST cannot be claimed on the related long-term rental expenses.
- GST treatment follows the seller or landlord’s taxable activity and registration position, not the commercial label alone; claims are limited to costs used to make taxable supplies.
- A land transaction must be zero-rated only when all Inland Revenue conditions are met at settlement, including both parties being registered and the buyer’s taxable-use and principal-residence intentions.
- Incorrect property GST treatment can require GST repayment or other adjustments, so confirm the transaction-specific position before signing.
- Mixed taxable, exempt or private use can require a supportable initial allocation and later GST adjustments.
GST is generally charged at 15% on taxable supplies, but property treatment depends on the activity, registration, use and transaction facts. Confirm those facts before relying on a price or signing an agreement.
Long-term residential rent is exempt, while other property use may form part of a taxable activity. A property’s label alone does not settle the GST treatment of its purchase, rent, expenses or sale.
Residential Property and GST
Residential rental accommodation is exempt from GST. This means:
- You do not charge GST on residential rent
- You cannot register for GST based solely on residential rental income
- You cannot claim GST on expenses related to residential rental properties
Inland Revenue confirms the exemption for long-term residential rental income and related expenses. Accommodation types outside ordinary long-term renting can have different rules, so classification should be checked on its facts.
What This Means Practically:
For a long-term residential rental, GST on related expenses cannot be claimed. For any other property activity, a claim depends on GST registration, taxable use and the current adjustment rules.
Commercial Property and GST
A property activity can require GST registration when taxable-activity turnover was at least $60,000 in the last 12 months or is expected to reach that amount in the next 12 months. Once registered, GST is returned on taxable supplies and input GST is claimed only to the extent allowed for taxable use.
Commercial Property GST Benefits:
- ☐ Confirm whether the acquisition is taxable, exempt or compulsorily zero-rated before claiming anything
- ☐ Claim GST only for costs used to make taxable supplies and keep supporting records
- ☐ Apportion professional fees where they relate to taxable and non-taxable use
- ☐ Check whether each operating cost actually includes claimable GST
Short-Stay Accommodation
Short-stay accommodation is a taxable activity for GST. Its treatment is distinct from long-term residential renting, and marketplace bookings have specific rules from 1 April 2024.
You must register when turnover from all your GST activities crosses the statutory test. For marketplace bookings, the marketplace generally collects and pays GST whether the host is registered or not; direct bookings follow ordinary GST rules.
The rules around short-stay accommodation can be complex, especially if you use the property for both short-stay and long-term rental at different times. Get professional advice before proceeding.
Buying Property: GST Implications
When purchasing property, GST treatment depends on several factors:
- Seller not registered and not liable to register: GST may not apply, but liability depends on whether the sale is part of a taxable activity
- Long-term residential rental: rent is exempt, but a sale or change of use needs separate transaction-specific analysis
- GST-registered seller making a taxable land supply: apply the compulsory zero-rating conditions at settlement or the applicable GST rate
Zero-Rating on Property Sales
A land transaction must be zero-rated at settlement when both parties are registered, the buyer intends taxable use, and neither the buyer nor a relative intends principal-residence use. All conditions must be satisfied; registration alone is not enough.
Zero-Rating Example:
Illustration only: a land price and its GST-inclusive or GST-exclusive wording cannot be interpreted safely without the agreement and the compulsory zero-rating facts. Zero-rating changes the rate to 0%; it is not a discount or guaranteed saving.
Selling Property: GST Considerations
When you sell property, GST treatment depends on your registration status and the buyer's status.
The GST Trap:
If a GST-registered seller makes a taxable land supply and compulsory zero-rating does not apply, GST may be payable at 15%. The amount borne by each party depends on the agreement and facts; do not infer it from the headline sale price.
This is why sale and purchase agreements must clearly address GST. The contract should specify whether the price includes or excludes GST and what happens in different scenarios.
Going Concern Exemption
A going-concern supply can be zero-rated only when its statutory requirements are met. A tenanted building is not automatically a going concern; obtain transaction-specific tax and legal advice.
Zero-rating is a 0% taxable supply, not an exemption, and it should not be assumed solely because a property is tenanted or both parties are registered.
Mixed-Use Properties
Where property use includes taxable, exempt or private components, GST deductions and adjustments must reflect the taxable-use proportion under the current rules.
Use a supportable method that reflects actual taxable use and keep the calculation and evidence. Do not assume floor area or income is appropriate for every property.
Change of Use Rules
If actual taxable use differs from intended use, a change-in-use adjustment may be required. Land has specific adjustment periods, thresholds and wash-up rules, so calculate the result from current Inland Revenue guidance.
A later move from exempt or private use to taxable use may support an adjustment, but the result depends on registration, prior deductions, intended and actual use, and the current adjustment rules.
Common GST Mistakes
Mistakes to Avoid:
- ☐ Claiming GST on residential property expenses
- ☐ Not addressing GST properly in sale and purchase agreements
- ☐ Assuming all property sales are GST-free
- ☐ Testing only short-stay income instead of turnover from all GST activities, or overlooking marketplace rules
- ☐ Ignoring change of use implications
- ☐ Not keeping proper GST records and invoices
Working with Professionals
Inland Revenue recommends consulting a tax adviser before signing property paperwork. Use an adviser who can assess the specific activity, registration, agreement, use and sale facts.
Have a property lawyer review the agreement’s GST wording, declarations and consequences before signing; the correct drafting depends on the transaction.
Record Keeping
GST-registered people must keep taxable supply information to support GST returns and expense claims. Since 1 April 2023, the required information can be held across records and need not be a single document called a tax invoice.