Property Purchase with GST Zero Rating

Helping My Client to Purchase a Property…With Significant GST Savings of $260,000

In February 2023 my client was proceeding to purchase a house, that previously was owned by a building company and was being used as their show home. The sale was proceeding with the purchase price including GST. This sale and purchase had been signed, the property became unconditional and loan document had been issued by the Bank for execution. Due to the arrangement between the buyer and the seller, my client will be moving into the property in 24 months’ time. Prior to this, the now ‘sold’ show home is being leased back to the building company for them to use for this purpose and there was a commercial lease agreement executed.

On review of the documents, we identified two serious issues:

1. Deemed GST registered due to the income from the commercial lease of the property.
2. GST payable at market value when my client moves into the property in 2 year time.

Advisory Accountants Support & Expertise:: As a result of understanding the GST Zero Rated rule and commercial experience on property transactions, it was determined that the sale price did not require GST to be added, saving my client $260k. As the sale & purchase agreement was signed, it required extensive negotiation with the seller for them to reduce the sale price by the GST amount. As a result of our expertise and experience, $260,000 was deducted from the final sale price, and we amended the purchase price in the agreement.

Advisory Accountants have the experience and expertise with a wide range of commercial and residential property purchases, to advise you on your specific tax requirements.