You will not be able to claim GST on a commercial property purchased for a taxable activity when:
- both you and the seller are GST-registered
- the seller continues running the taxable activity until the property is transferred to you
- you’re going to continue the running of the property as a taxable activity.
This type of transaction is zero-rated. If you buy a commercial property and it’s used partly for an exempt supply (for example long-term residential accommodation) you’ll need to return GST on the exempt supply.
You may be able to claim the GST second-hand goods input tax credit on a residential property. You must:
- buy it from a non-GST registered person
- use it to make taxable supplies.
For example, you’re a local authority. You buy a residential property from someone who is not GST-registered. You may use it the property for roading purposes or a reserve. You can claim a GST second-hand goods input tax credit on the residential property.
When you cannot claim GST on a property
You cannot claim GST on:
- zero-rated land transactions
- on properties you buy for residential accommodation.
GST and taxable and non-taxable supplies
Sometimes you might use the property for both taxable and exempt supplies. When you do, you base your GST deduction on the percentage of taxable supplies, that is the business usage.