Posted 10 Oct 06

GST TRAPS

Watch out for the various treatments of GST on legitimate expense items.

For example GST on paint -:

Used to paint the sharemilker’s or farm manager’s house – No GST claim (but 100% allowable for Income Tax)

Used to paint an owner occupied farm house – Claim 25% of GST (and 25% for Income Tax)

Used to paint a sleepout or caravan for temporary workers – shearers / fencers etc – 100% claim for GST and income tax.

Used to paint farm buildings - 100% claim for GST and Income Tax.

LAND SALES

There is a nasty trap where land is sold “subject to title”. Even if you are on a “cash basis” for GST, the signing of a contract for a sale of land for over $225,000 will probably trigger an immediate GST liability for the full amount of the GST. Although the contract is “subject to the issue of a title”, if there are no other conditions, it is an unconditional contract. The normal 365 day waiver of this provision, (short term agreement), cannot apply as it cannot be absolutely guaranteed that the title will be issued within that period. Check with your accountant before signing – a 10% deposit may still leave you out of pocket for months!

Tax Tips Prepared by Ian Stewart, Farm Accounting & Taxation, P.Bag 47900 Ponsonby.
Email istewart@farm-accounting.co.nz Ph 09 3764894 Fax 093786682.