Nathan was a director of a company that owned rental properties. He made good money from the company’s various properties. His company sold one of the apartments it owned to another GST registered company. He went to his lawyer and accountant to ask if he had to pay GST on the sale.

The answer is no. The transaction will be what is called “zero-rated” which means GST is compulsorily charged at 0%. Neither party can pay or claim GST.

Under recent changes to the law, any sale and purchase of land/property that meets the following criteria must be zero-rated:

  1. Both vendor and purchaser are GST registered;
  2. The purchaser intends to make taxable supplies from the property;
  3. The purchaser does not intend to use the property as their principal place of residence.

GST will not be relevant for any non GST-registered person or other entity selling property to a non GST-registered person or entity.

The latest Agreement for Sale and Purchase requires purchasers and vendors to answer various questions about GST which helps ascertain whether GST will be payable by either of them. Where the vendor is not GST registered these questions should be marked as not applicable. Likewise if a party is registered for GST but not for activities relating to the sale of the land, the questions will also not apply.

If you are unsure whether GST is payable in relation to a particular property transaction you should speak to your accountant or lawyer before signing any agreement.