Beach house rental un­der IRD scrutiny

Matamata Chronicle - - Rural Delivery -

Goods and ser­vices tax has had a tur­bu­lent 12 months. Co­op­eraitken as­so­ci­ate Coral Phillips asks beach house own­ers: Do you rent out your Beach House short-term? And is it owned through a farm en­tity that files GST re­turns?

If your an­swers are yes, chang­ing GST leg­is­la­tion from April 2011 means this rent in­come is sub­ject to GST too.

With leg­is­la­tion around the def­i­ni­tion of com­mer­cial rental prop­er­ties, Ms Phillips said beach houses were a con­cern.

A com­mer­cial rental prop­erty now in­cludes res­i­den­tial prop­er­ties if they are rented out for short-term, for ex­am­ple a beach house.

‘‘You may have an en­tity (a trust, part­ner­ship or a com­pany) which owns a farm and there­fore is GST reg­is­tered. If this en­tity also owns your beach house and you rent it out short-term, you must now re­turn GST to the In­land Rev­enue Depart­ment on the in­come and ex­penses for the beach house,’’ Ms Phillips said

Many peo­ple ad­ver­tised their beach prop­er­ties on the in­ter­net, per­haps the Book-a-bach site or sim­i­lar and it would be very easy for the IRD to trace, she said.

As many of these prop­er­ties are now worth much more than when they were orig­i­nally pur­chased this will mean a sig­nif­i­cant GST im­pli­ca­tion if they are sold.

‘‘If the en­tity which owns the beach house is not reg­is­tered for GST there are no im­pli­ca­tions for you with the new rule. You will not need to be GST reg­is­tered un­less your turnover ex­ceeds $60,000 a year which would be far in ex­cess of the turnover of most beach prop­er­ties. Also if your beach house is rented out full­time or not at all, you have no wor­ries,’’ she said.

Ms Phillips said a so­lu­tion to these GST changes could be to trans­fer the prop­erty to an­other en­tity which was not GST reg­is­tered and ad­vised talk­ing to your ac­coun­tant it this might ap­ply to you.

‘‘We have seen many changes to GST over the last 18 months. Back in Oc­to­ber 2010 the rate in­creased from 12.5 per cent to 15 per cent which had an im­pact on farmer’s cash­flow,’’ Co­op­eraitken di­rec­tor Peter Hex­ter said.

‘‘In April 2011, land trans­ac­tions be­tween GST reg­is­tered per­sons be­came zero rated,’’ he said. ‘‘Make sure your ac­coun­tant is in­cluded early in dis­cus­sions to make sure the GST part is dealt with cor­rectly, pro­tect­ing you from hav­ing to fi­nance this amount.

‘‘The GST ap­por­tion­ment rules were changed for as­sets pur­chased which have mixed busi­ness and per­sonal use.

‘‘The num­ber of on­go­ing ap­por­tion­ment cal­cu­la­tions will de­pend on the value of the as­set and also how the ac­tual use varies with the in­tended use,’’ he said.

‘‘Your ac­coun­tant will do this work for you to en­sure you com­ply with the IRD.’’

CORAL PHILLIPS

PETER HEX­TER

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