Providing accommodation in a commercial dwelling is a taxable supply for GST. Commercial dwellings can be:
- serviced apartments managed by a third party and where the resident does not have quiet enjoyment as defined in the Residential Tenancies Act
- residential care homes.
The income from providing accommodation in a house or flat is an exempt supply, which means there is no GST to pay. We do not see renting out a single apartment as a commercial dwelling.
GST and the four-week rule for commercial dwellings
For a commercial dwelling, you’ll need to charge GST on the full value of accommodation for the first four weeks' stay.
After four weeks, charge GST only on 60% of the value of the domestic goods or services. These are usually the right to occupy the premises and any of the following if they’re included in that right:
- cleaning and maintenance
- electricity, gas, air-conditioning or heating
- telephone (not tolls), television, radio or similar chattels.
You'll need to separate any joint charges covering all supplies for bed and breakfast. We'll need the fully taxable supplies (breakfast) separate from the domestic goods or services (bed).
GST and the over four-week rule for commercial dwellings
If you agree that a stay can be for more than four weeks, charge GST on 60% of the value of domestic goods or services. Do this from the start of the stay.
Rest homes and private hospitals
When providing accommodation in rest homes and private hospitals you split the costs for domestic and non-domestic goods and services. There are standard rates for this apportionment (split).
Below are the rate we allow for rest home and private hospitals.
- 45% domestic goods and services.
- 55% non-domestic goods and services.
- 35% domestic goods and services.
- 65% non-domestic goods and services.
Claiming back GST on expenses
Usually you can claim back GST on the items you purchase for your commercial property. You’ll need a valid tax invoice.
Change in use
You'll need to make a GST adjustment if you turn your commercial property into exempt residential accommodation. We call these the ‘change in use' rules.
If you change the use of a property you may need to make a GST adjustment when the property is sold or there is a change in use.
Example: Changing property from taxable to non-taxable use
Smith Properties Ltd decides to convert their entire building to residential apartments and all commercial tenants vacate the building. The entire building is now used for non-taxable purposes (residential renting). Smith Properties Ltd must make an adjustment for the period in which the use changed to 100% non-taxable purposes.