Farm­ers need to look at GST rule changes

South Waikato News - - RURAL DELIVERY -

Coral Phillips, As­so­ci­ate at Co­op­eraitken 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 an­swer is ‘‘Yes’’, chang­ing GST leg­is­la­tion from April 2011 means this rent in­come is sub­ject to GST too.

Ms Phillips ex­plained with the chang­ing leg­is­la­tion around the def­i­ni­tion of com­mer­cial rental prop­er­ties, beach houses are a con­cern. A com­mer­cial rental prop­erty now in­cludes res­i­den­tial prop­er­ties if they are rented out.

For ex­am­ple, Ms Phillips said, "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 out your beach house short-term, you must now re­turn GST to the IRD on the in­come and ex­penses for the beach house".

Ms Phillips cau­tioned that as many peo­ple ad­ver­tise their beach prop­er­ties on the in­ter­net, per­haps on the "Book-a-bach" site or sim­i­lar it will be very easy for the IRD to trace.

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.

Ms Phillips also ad­vised "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 per an­num 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".

Ms Phillips ad­vised a so­lu­tion to these GST changes could be to trans­fer the prop­erty to an­other en­tity which is not Gst-reg­is­tered.

‘‘If this might ap­ply to you, we sug­gest you talk to your ac­coun­tant.

Mr Peter Hex­ter, Di­rec­tor Co­op­eraitken added "we have seen many changes to GST over the last 18 months. ‘‘Back in Oc­to­ber 2010 the rate in­creased from 12.5 per­cent to 15 per­cent which had an im­pact on farm­ers’ cash­flow.

Mr Hex­ter con­tin­ued "In April 2011 land trans­ac­tions be­tween Gst-reg­is­tered per­sons be­came zero rated.’’

Mr Hex­ter 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.’’

CHARGES: Changed leg­is­la­tion in April 2011 means rent in­come is sub­ject to GST.

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