Since the introduction of the new 15% GST rate on 1st October this year, most of the hype has been around the new rate and not the implication of the changes on investors and their future property transactions.
In an attempt to clarify exactly the changes for investors, listed below are changes as we see them and how they will affect you – the investor.
- An obvious change is the rate to 15%
- Nominating – When writing up a sale and purchase agreement, and you nominate a third party to take up the property (your choice if you do) then new tax rules apply now, where previously nominated transaction were very unclear. This is welcomed by many as it now clarifies what the nominees position is.
- Land transactions – zero rated now compulsory – this now totally avoids fraud through unlawful claiming of GST. Previously a purchaser could claim GST on the land – even though the seller may not have paid it – necessitating in IRD paying out GST when they had in fact not received any. In our opinion this is a great move.
- Dwelling definition changes – The definition of Dwellings has now been amended and clarified so that it now means a property which a person lives in and is their principle place of residence and therefore is GST exempt. What this has done is to remove or exempted the principle place of residence, but has included almost all other forms of accommodation into the fray – homestays, B & B’s, Boarding houses etc increasing the tax pool for the government.
Although it is great to be remain current with legislative changes within the NZ economy, like all tax issues, it is also prudent to seek independent advice from a property tax specialist to ensure that your interests are accurately protected. The last thing we all want to receive is an ugly letter from the IRD !