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GST adjustment for mixed-use assets

The following rules apply when owners of mixed-use assets are required to calculate an adjustment for GST input tax.

When the rules come into effect

This adjustment applies:

  • for holiday homes from 17 July 2013
  • for boats and aircraft from 1 April 2014.

If an apportionment has already been made under existing rules, the new rules will only apply to goods and services (rates, insurance etc) from the above dates.

How the calculation is worked out

The calculation is based on the income-earning days and private use days of the asset using this formula:
 

Amount of input tax    x income-earning days
 income-earning days + private days

The formula definitions

Input tax is the total input tax for the mixed-use expenses.
Excludes input tax on expenditure relating solely to income- earning and private use.
Income-earning days is the total number of days when rent or a fee is paid for the use of the asset, regardless of the amount paid. Includes family, non-associated persons and any income-earning use spent
repairing or relocating the asset.
Private days is the total days the assets is used with no amount of rent or fee paid

Using alternatives to "days"

You can use other measures in the apportionment formula if they reflect the time the asset is used more accurately. For example:

  • flying hours for an aircraft
  • nights for a holiday home.

You calculate the adjustment for an adjustment period to get the amount of GST input tax to return.

Note

The definition of "income-earning days" differs from the days used to calculate the amount of expense allowed as a tax deduction. For GST purposes it includes all days any consideration (rent) is received irrespective of the percentage of market rate paid.

Example of the calculation for GST input tax

Example

Regan purchases a charter boat on 1 April 2014 for $450,000 which is used both to earn income and for private use. He accounts for GST input tax for the year as follows:

Fully deductible expenses

annual Maritime NZ survey fees
$700
charter advertising
$400
food/drinks (charter guests only)
$500

Regan claims the full input tax and no adjustment is made as the expenses relate solely to income-earning.

Not deductible

$250 for family fishing licenses is a private expense, so no GST input tax is claimed.

Apportioned (mixed-use) expenses

There are apportioned (mixed-use) expenses that relate to both income-earning and private use.

mooring fees
$2,000
fuel
$1,200
insurance
$2,450
general repairs
$300
Total expenses
$5,950

When Regan acquired the boat he estimated that the taxable use would be 50%. He claimed input tax on the mixed expenses of 29,735.86 (credit) as follows:

Expense Cost GST value 50% input tax claimed
purchase of boat
$450,000
$58,695.65
$29,347.82
mooring fees, insurance, fuel
$5,950
$776.09
$388.04
Total input tax
 
 
$29,735.86

During the year the boat was used:

 

Income-earnings days

days fully chartered to the public
102
days chartered at 50% market rate to Regan's local fishing club
20
Total
122
 

Private days

days the family used the charter boat without making any payment.
30

income-earning + private days = 152

Total input tax (boat $58,695.65 + mixed-expenses $776.09) = $59,471.74

The calculation is:

$59,471.74 x 122
152
=  $47,733.90 input tax

Regan claimed input tax of $29,735.86 during the year. He is entitled to claim a further amount $17,998.04 (credit) as an adjustment for input tax in his final GST return of the year. The calculation is:

$47,733.90 minus $29,735.86 = $17,998.04

Find out more

You can find more information in our Tax Information Bulletin, Vol 25, No 9, October 2013 pages 21-22.