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Avoid unexpected GST bills on apartment sales

Investors selling apartments need to make sure they’re aware of all the tax involved, to avoid unexpected GST bills.

Monday, February 23rd 2009, 3:30PM

by The Landlord

The Inland Revenue Department (IRD) says many investors don’t pay GST when they buy an apartment, but may be faced with a large GST bill when they want to sell if there have been any changes, such as to how the apartment is used, or if the original management agreement has expired.  

“In many cases, the apartment purchase included a lease to a management company, often with a guaranteed rental arrangement,” IRD assurance manager Richard Philp says.

If the apartment is bought as a going concern, no GST is payable, provided certain conditions are met, such as both parties being GST-registered. IRD defines such a transaction as “zero-rated” for GST.



However, Philp says if the investor later decides to sell the apartment, or the way in which it is used has changed, GST may have to be paid on the sale, or at the point in time a change in use occurs.

“People who bought an apartment with a managed lease should talk to a tax adviser before making a decision about selling it or changing its use,” he says.

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AIA - Back My Build 6.19 - - -
AIA - Go Home Loans 8.74 7.24 ▼6.75 6.65
ANZ 8.64 7.84 7.39 7.25
ANZ Blueprint to Build 7.39 - - -
ANZ Good Energy - - - 1.00
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ASB Bank 8.64 7.24 ▼6.75 6.65
ASB Better Homes Top Up - - - 1.00
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BNZ - Classic - 7.24 6.79 6.65
BNZ - Green Home Loan top-ups - - - 1.00
BNZ - Mortgage One 8.69 - - -
BNZ - Rapid Repay 8.69 - - -
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BNZ - TotalMoney 8.69 - - -
CFML Loans 9.45 - - -
China Construction Bank - 7.09 6.75 6.49
China Construction Bank Special - - - -
Co-operative Bank - First Home Special - 7.04 - -
Co-operative Bank - Owner Occ 8.40 7.24 6.79 6.65
Lender Flt 1yr 2yr 3yr
Co-operative Bank - Standard 8.40 7.74 7.29 7.15
Credit Union Auckland 7.70 - - -
First Credit Union Special - 7.45 7.35 -
First Credit Union Standard 8.50 7.99 7.85 -
Heartland Bank - Online 7.99 6.69 6.45 6.19
Heartland Bank - Reverse Mortgage - - - -
Heretaunga Building Society 8.90 7.60 7.40 -
HSBC Premier 8.59 - - -
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 7.85 7.05 6.75 6.59
Lender Flt 1yr 2yr 3yr
Kainga Ora 8.64 7.79 7.39 7.25
Kainga Ora - First Home Buyer Special - - - -
Kiwibank 8.50 8.25 7.79 7.55
Kiwibank - Offset 8.50 - - -
Kiwibank Special - 7.25 6.79 6.65
Liberty 8.59 8.69 8.79 8.94
Nelson Building Society 9.00 7.75 7.35 -
Pepper Money Advantage 10.49 - - -
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Resimac - LVR < 80% 8.84 8.09 7.59 7.29
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Resimac - LVR < 90% 9.84 9.09 8.59 8.29
Resimac - Specialist Clear (Alt Doc) - - 8.99 -
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SBS Bank 8.74 7.84 7.45 7.25
SBS Bank Special - 7.24 6.85 6.65
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TSB Bank 9.44 8.04 7.55 7.45
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TSB Special 8.64 7.24 6.75 6.65
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Westpac 8.64 7.89 7.35 7.25
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