NEWS

Before purchasing a lifestyle block, particularly one being sold as + GST (if any), it is important to consider what you intend to do with the property.

If you register for GST in order to avoid paying the GST portion on the property, you must carry out a business activity not a hobby. A business is any profession, trade or undertaking carried on for a profit.

You can operate a business on a smaller block if say, you are breeding high value animals or growing flowers. The business you carry on needs to be carried out purposely and in a coherent way in order to generate an income.

If you only intend to run five head of cattle or 20 sheep in order to keep the grass down, and are claiming losses each financial year, IRD are likely to take a closer look. Expenses claimed must be reasonable and relate to your business.

If your activity is not carried out on a regular basis or you have no intention of making a profit, it is likely a hobby and you shouldn’t be registered for GST.

Grazing the neighbour’s stock may not necessarily be sufficient to be considered a business, ideally you would have a lease agreement in place.

 

Before purchasing a lifestyle property, please contact us to discuss the implications first.

 

Disclaimer

This information is intended to provide general advice only.  We recommend you discuss your specific situation with your Accountant.