May 05 2011
On 1 April 2011, the GST position for some land transactions took effect. Where property including land is sold between two GST-registered parties, the transaction will be ‘zero-rated’ for GST purposes.
The new legislation does not apply to properties that are purchased where the buyer will occupy the property as his (or her!) principal place of residence. In those circumstances, GST will continue to be payable on the purchase price.
There are new terms of sale to be attached to the Agreement for Sale & Purchase agreement where the zero-rating of GST is to apply. Also, a buyer must also complete a declaration that the property will not be used as his or her principal place of residence after purchase is complete.
Buyers of GST zero-rated property should also note that where the use of the property changes after its purchase, the buyer may be required to pay GST on the purchase price.
If you have any concerns about whether this situation relates to your individual circumstances, we strongly recommend that you consult with us before signing the Agreement for Sale & Purchase.