2009 media releases
Avoid unexpected GST bills on apartment sales
23 February 2009
People selling investment apartments need to make sure they're aware of all the tax issues involved, to avoid unexpected GST bills.
Inland Revenue Assurance Manager Richard Philp said many people paid no GST when they bought an apartment, but may be faced with a large GST bill when they want to sell the apartment.
"In many cases, the apartment purchase included a lease to a management company, often with a guaranteed rental arrangement," he said.
No GST was charged during the transaction, because investors bought the apartment as 'a going concern'. When a transaction involves sale of a 'going concern', no GST is payable, provided certain conditions are met such as both parties being GST-registered. The transaction is defined as 'zero-rated' for GST.
Mr Philp said if the investor later decides to sell the apartment, or the way 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.
For example, the original management agreement may have expired, and the apartment may be rented to tenants directly. Alternatively, the owners may decide to live in the apartment themselves.
"People who bought an apartment with a managed lease should talk to a tax advisor before making a decision about selling it or changing its use," said Mr Philp.
Inland Revenue has produced a new brochure called Thinking of selling your leased apartment? (IR498) to provide information about tax issues related to GST zero-rated apartments.
For more information go to www.ird.govt.nz/property.
For further information:
Catherine Delore
(04) 890 1743
(029) 890 1743
catherine.delore@ird.govt.nz
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Corporate Communications
Inland Revenue
For all media enquiries phone: 04 890 1698
For general communications enquiries
Phone: (04) 890 1936
Email: corpcomm@ird.govt.nz
Fax: (04) 498 5809
P O Box 2198
12-22 Hawkestone Street
Wellington
New Zealand
Date published: 23 Feb 2009
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