If so, you might want to remove them from the GST net before 1 April 2025. For example, you might use your bach or lifestyle block mainly for private purposes but be GST registered for providing short-stay accommodation or leasing land. Maybe you originally claimed back all, part or even none of the GST when you purchased the land. 

When that asset is sold in the future, Inland Revenue will treat the sale as a GST taxable supply; even if the owner only claimed back part of the GST (or even no GST) when the asset was originally purchased.   

Recent GST developments affecting owners of bachs and other appreciating assets 

Additional to that change, the App Tax (introduced on 1 April 2024) has been shaking up the GST treatment of bachs and homes used for short-term rental. Under those rules, platforms such as Airbnb have to charge and account for GST when customers book accommodation in listed baches or homes; and this applies whether or not you as the bach or homeowner have chosen to GST register your short-term accommodation activity. 

As a result of the App tax, some listed platforms are requiring bach and homeowners to register for GST if they want to continue listing their properties on the platform. Care is required as this might compromise the GST status of those assets. 

In a separate GST rule change, a significant “one-off, limited time” GST concession will help some owners remove their bachs, lifestyle blocks and other appreciating assets from the GST net. That is, your GST taxable activity (for example, supplying short-term accommodation) would continue but the future sale of your asset would not be subject to GST. 

In short, if your bach, lifestyle block, family home or similar assets are inadvertently caught in a GST trap; you should review your GST position and act before the concession closes on 1 April 2025. 

Let’s cover some common GST land traps in one generic example: 

• Some while ago you purchased land (a bach, lifestyle block or home – partly used as a home office) for $1 million; and 

• You purchased the land mainly for private purposes and use it to generate some income subject to GST. For example, you earn short-term rental income of between $30,000 and $65,000 p.a. from Bookabach; and 

• You are GST registered (maybe voluntarily); and for whatever reason your bach, lifestyle block or home office is in the GST net; and 

• At some time in future, you will sell that land – for $2 million. 

At first instance, Inland Revenue would expect you to account for GST at the rate of $130,434 per $1,000,000 of sale proceeds. 

As a variation of the above facts, it may be that you were not GST registered but from 1 April 2024, the listed platform has required you to be GST registered to continue your listing(s). In that case you would be concerned about the potential for any future sale of your land to be a taxable supply. 

Inland Revenue’s view 

Inland Revenue is of the view that where a bach, lifestyle block or home office is used (directly or indirectly) as part of a GST taxable activity; then any future sale of the land will be a GST taxable supply. 

This applies whether or not you originally claimed back all, part or none of the GST on the asset’s original purchase price and or capital improvements. 

Certain concessions, and in in some cases actions required, before 1 April 2025 

If your land or other appreciating asset was acquired and is used mainly for private (or GST non-taxable purposes), and you also use that asset directly or indirectly for making GST-taxable supplies (such as providing accommodation in a bach) newly introduced concessions may apply. For example: 

• If you use your land in a taxable activity but have never claimed GST on part of the purchase price or any capital improvements, then it is now possible that no GST will apply to the future sale proceeds. This could even apply if your GST taxable income exceeds $60,000, assuming the main use of the land is still non-taxable. 

• Alternatively, you may use your land directly or indirectly in a taxable activity (for example, supplying accommodation in a bach, or using a home office as part of your consulting business), and have partly claimed GST (say 20%) on the purchase price and/or capital improvements. It is now possible to repay that GST by 1 April 2025; and any future sale of that land will not be a taxable supply. 

Use of listing platforms such as Bookabach from 1 April 2024 

From 1 April 2024, new GST rules have affected both listing platforms and owners of baches or homes listed on those platforms. 

Due to the complexity of the new GST rules; some platforms require existing owners who want to continue listing on the platform to register for GST. Take care before you do this for the reasons referred to above. Will your future sale proceeds be subject to GST? 

The door is closing... 

Call your tax advisor if you believe the future sale of your bach, lifestyle block, home or other appreciating assets may be caught by these GST rules. In some cases, remedial options will expire permanently on 31 March 2025.