GST caution for house buyers

Press, 11 September 1986, Page 31

GST caution for house buyers

PA Wellington House buyers have been warned to be careful when signing contracts for new houses in case the agreement includes GST but the quoted sale price does not The National Housing Commission is concerned that unwary house buyers may be trapped into paying an eleventh of the purchase price, GST, on top of what they believe to be the full price. The commission’s chairman, Mr Ewing Robertson, said some house buyers could find that they would have to pay extra because settlement was not until after October 1, when the tax is imposed.

Mr Robertson said people buying a house should consult a lawyer before signing any contract. The person selling the house may be liable to be a registered seller which means GST will be owed on the sale if it is settled after October 1. In such a case a $lOO,OOO house would incur an extra $lO,OOO. A similar warning was issued last month by the Law Society and the Inland Revenue Department’s assistant director of policy and reserach, Mr Peter Barrand. Mr Barrand said the crucial date for GST purposes was that of settlement — the day final payments are made and possession taken.

If this was before October 1 there was no liability but after that the liability applied only when the seller was a registered person, someone such as a builder of speculation houses or a builder who had renovated a house for selling. The department said there would be no hard and fast rule as to who was liable to be a registered seller but if a person was selling for personal reasons and not business, that person would not normally be considered a registered seller. Mr Barrand said anyone entering into any transaction, not just .a house, should take steps to find out the GST liability.