UHY Haines Norton’s Managing Director Grant Brownlee outlines some of the tax pitfalls to be aware of concerning apartments.
Buying a serviced apartment may be seen as an attractive investment option, particularly if you have children planning to attend University in the future and you don’t fancy the idea of paying rent for their accommodation away from home.
However, serviced apartments have the potential to hit you very hard with unexpected GST and income tax bills all as a result of innocent changes in your family circumstances.
Let’s say you purchased your serviced apartment from a GST-registered party and the apartment had a management lease in place. The apartment was being managed as short term stay accommodation and you purchased it as a ‘going concern’ so the transaction was ‘zero rated’ for GST. In other words, you paid no GST on the purchase. To achieve this ‘zero GST’ result you were required to become registered for GST. Every month the management company pays you rent net of GST, management fees and other expenses. Everything is rosy.Details