Understanding the GST Treatment of Subdivision Projects in New Zealand

• Inland Revenue issued a draft QWBA on the GST treatment of subdivision projects
• Understanding when a subdivision project qualifies as a “taxable activity” for GST purposes is important
• The concept of taxable activity impacts the GST treatment of the property, GST change in use, ability to claim GST on development costs, and GST treatment after the project is complete
• Property developers need to understand the GST and income tax implications at the start of a project or if intentions change
• The outcome depends on the specific situation and there is limited guidance for cases that are “on the margin”
• Taxpayers have the burden of proving a change in intention during development
• Even if a subdivision activity is not taxable for GST purposes, the resulting sale may still be subject to income tax
• Property developers should seek guidance from Deloitte advisors to understand the GST and income tax implications before proceeding with a transaction
• Various factors determine if a subdivision project is considered a taxable activity, including scale, level of development work, number of lots created and sold, time and effort invested, financial commitment, repetition, and alignment with an existing taxable activity
• Larger-scale subdivision projects with extensive development work are more likely to be considered a taxable activity.

Source: www2.deloitte.com

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.

---

---