Are you avoiding issues with Property Transactions – What happens around GST?

Whether there is GST or not on property transactions gives rise to a lot of confusion. The implications if you do get it wrong can cause serious ramifications for both parties to the agreement – think 15% of the purchase price. We are talking hundreds of thousands if not millions of dollars.

The standard ADLS/REINZ Sale and Purchase Agreement for Real Estate in New Zealand (currently ninth edition 2012 (7)) has highlighted the need to ask questions around GST. The agreement does make things slightly easier as long as the form is filled in correctly. We have put together this basic overview as a starting point.

Let’s set out the basics firstly from the Vendors Point of View. To be able to register for GST the vendor is not using the land for their principal place of residence and instead is using the land for making “taxable supplies”. Examples could be:

Taxable Supply for GST purposes
Long Term residential letting NO
Short term letting where you receive a rate per night. For example – Airbnb YES
Commercial Lease of a building YES
Farming (but there are exceptions) YES

If the vendor does make a taxable supply and has registered for GST, then they need to show this on the Sale and Purchase Agreement by:

Respond YES to the question asking whether the Vendor is registered under the GST Act in respect of the transaction evidenced by the agreement and or will be so registered at settlement This question is located at the top of Page 1 of the Agreement
The purchase price must be shown as “plus GST (if any)” Located on Page 1 of the Agreement. This averts the possible problem if the purchaser nominates a non-GST registered entity after signing. Meaning the vendor would still need to account for 15% of the purchase price to the Inland Revenue, and ends up getting 15% less of the sale as a result of the Purchaser’s actions.
The Vendors GST registration number is to be entered in under Schedule 2 of the agreement.

If the vendor is not registered for GST, then they respond NO to the question asking whether the Vendor is registered under the GST Act in respect of the transaction evidenced by the agreement and or will be so registered at settlement and they do not have to fill out Schedule 2.

Secondly if the purchaser is GST registered then they need to state this in Schedule 2 answering all questions 3 to 11. If they are not registered, then they would answer questions 3 and 4of schedule 2 as NO.


Let’s look at some possible scenarios

Vendor GST Registered Purchaser GST Registered
NO NO 1.      No GST on the sale

2.      the Vendor must answer NO on the front page to confirm they are not GST registered.

3.      The price can be shown as either Plus GST (if any) or inclusive of GST (if any) or if neither is crossed out it automatically defaults to Inclusive of GST (if any). In reality it makes no difference.

YES NO 1.      The vendor must answer Yes on the front page to confirm they are GST registered.

2.      The price must be shown as Inclusive of GST (if any). This way the vendor can only be better off if the Purchaser Registers.

3.      Questions 1 and 2 must be answered on Schedule 2

NO YES 1.      the Vendor must answer NO on the front page to confirm they are not GST registered.

2.      The price to be shown as inclusive of GST (if any)

3.      The purchaser can claim the GST in their GST return as they pay for the property (irrespective of their actual GST registration basis).

YES YES 1.      Where both parties are GST registered AND the purchaser declares on Schedule 2 that they intend to use the property for making taxable supplies AND the purchaser does not intend at the time of settlement to use the property as a principal place of residence then under Clause 15 it will become compulsory for the transaction to be zero rated for GST purposes.

Yet, let’s consider what happens when the GST status of one of the parties to the transaction changes prior to the settlement date. If the purchasers GST status changes they are required under clause 14 to provide the vendor with no later than 2 days prior to settlement for the correct position to be recorded on the settlement statement. The relevant date for GST status is taken from the status of the parties at the date of settlement.

In the next edition of Covisory Connect we will address GST issues around partial use and change in use. As always, we would advise that you seek specialist legal and tax advice when faced with GST.




Values play a fundamental part in any business. Having a central core of four or five values means that they are easy to communicate to both your employees and your clients. These values are a central part of who you are – and who you want to be.

At Covisory we focus on a core of 5 values:

  1. Integrity – it is about doing the right thing at all times and all circumstances whether or not someone is watching.
  2. Accountability – a willingness to take responsibility for one’s own actions.
  3. Diligence – this is not about drudgery it’s about asking the right questions, emphasising people’s strengths and a philosophy of perpetual quality improvement both on a personal and business perspective.
  4. Perseverance – being in it for the long term, exercising judgement and reflecting a sense of confidence and determination in all that we do.
  5. Discipline – this is not about following orders, it is about people thinking on their feet, attention to detail and solving problems effectively.

Values are fundamental to motivating and sustaining people’s behaviour over the long term. By emphasising these core values, other positive values flourish. They help people to adjust to the ever changing priorities and demands in today’s business, and they help businesses to sustain competitiveness.

By becoming more aware of these important factors, you can use them as a guide to make the best choice in any situation.

Do you need help with Relationship Property Disputes or Trust Conflicts?

Do you need any support with…

  • Relationship Property Analysis
  • Forensic Accounting
  • Valuations of Business Interests
  • Independent Trustees Services

We do understand from our experience that there are times that you or someone at your firm needs someone like us who stands independent from each party.

We can cut through the mountains of data for you to find out what really went on and appraise you of your client’s potential claims or defences.

In the past we have been called in to stand as a court appointed independent trustee in order to protect the trust assets from disputing spouses or factions. We have found that the independence of a privately appointed trustee or advisory trustee is all that is needed. The Covisory team can assist you with this and other related services.

You can find us online at Contact Nigel Smith or Barry Tuck to find out how we can help you or your clients solve your problems.