GST question

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Geektastic

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#214145 29-Apr-2017 18:11

I can and will ask the accountant next week.

However I'm just doing some back of the fag packet calculations and wondered if anyone knew if cost of sales (eg agent's free, advertising) are deducted before calculations GST on property sales. (Yes GST will be payable on the sale).

cadman

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#1772566 29-Apr-2017 20:42

Not sure exactly what angle you're asking from but as the agent fees and advertising expenses all attract GST it doesn't matter - it all balances out. Say a sale is $100+GST ($115) and costs are $20+GST ($23) the balance is still $80+GST ($92). The purchaser still pays $100+GST, the vendor pays the agent $20+GST, deducts the $3 of GST they paid the agent from the $15 they collected from the purchaser and passes on the balance of $12 in GST to IRD. GST is a zero-sum game to GST registered entities - they don't ever actually pay it.

nitrotech

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#1772626 29-Apr-2017 21:03

Every time i've sold property the agent fees are always + GST so say 4%+GST - this is completely seperate to the cost of the property.

So $100,000 + GST

+ Agent fee say 4% $4,000 + GST

even though the agent takes the fee from the deposit it's actually not really coming off the listing price it's an additional invoice related to the property sale.

cadman

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#1772752 30-Apr-2017 10:38

Wait - are you asking if GST payable by the purchaser is only calculated on the balance of the sale after expenses? If so, no.

nutbugs

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#1772768 30-Apr-2017 11:18

Not I'm my experience. Gst will be calculated on the total sale price. Your expenses are not relevant to that. Although if the purchaser is gst registered it is a moot point as the transaction will be exempt from gst, saves on paperwork :-)

Geektastic

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#1772807 30-Apr-2017 12:45

I'm selling a sub divided plot which I will have to pay GST on.

I'm trying to work out if I can deduct anything before calculating the gsti need to pay.

mattwnz

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#1772811 30-Apr-2017 13:23

I would suggest asking an accountant, as these things can sometimes be a bit more complex than you think.

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cadman

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#1772974 30-Apr-2017 18:36

If you're GST registered, which you must be in order to be charging GST on the sale, YOU don't pay GST. Period. You collect GST from the purchaser then deduct the GST you paid the agent etc. and pass on the difference to IRD as per my initial post. You charge the GST on the sale price.

mattwnz

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#1772978 30-Apr-2017 18:40

Would the buyer have to pay GST though? Often when you see sales of land like this, it will often say 'plus GST if applicable', say if a business is selling off a farm, and depending if a business or a private buyer purchases it.

cadman

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#1772980 30-Apr-2017 18:49

If the transaction is between two GST registered entities it can be zero-rated meaning neither party pays nor collects GST (as for large sums the cost of funding the GST when neither party would actually be liable for it can be considerable for the duration of the GST return periods until it is credited back to the GST-registered purchaser). That's why offers sometimes say "+GST (if applicable)". As the OP is asking about charging the GST he's determined it is applicable to this sale.

mattwnz

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#1772981 30-Apr-2017 18:53

cadman:

If the transaction is between two GST registered entities it can be zero-rated meaning neither party pays nor collects GST (as for large sums the cost of funding the GST when neither party would actually be liable for it can be considerable for the duration of the GST return periods until it is credited back to the GST-registered purchaser). That's why offers sometimes say "+GST (if applicable)". As the OP is asking about charging the GST he's determined it is applicable to this sale.

Thanks, that makes sense.