GST on Subdivisions

If you are subdividing a property, then you need to consider whether GST applies. GST applies to activities that are continuous or regular. This is a grey area with subdivisions.

In the leading Court of Appeal case (Newman 1995), a taxpayer purchased land to construct a family home for himself. He subdivided the land into 2 lots and sold 1 of those lots to fund the family home.

After the IRD won in the TRA and High Court, that was overturned by the Court of Appeal who ruled that the subdivision of land into 2 lots was not continuous or regular so GST did not apply.

In TRA Case S70 (1996), a subdivision of a family home creating 4 new lots costing $63k was found to be subject to GST.

In Wakelin v IRD (1997), a subdivision of a family home creating 5 new lots costing $33k was found to be subject to GST.

For GST not to apply, the following factors would generally need to be present:

- It is a subdivision involving your family home
- It is a subdivision from 1 lot into a maximum of 4 lots (3 extra lots)
- You continue to live in the family home
- The subdivision involves minimal time, effort and cost

If you are thinking about subdividing, you should seek advise regarding your specific circumstances.


Disclaimer: The above article is general in nature and we recommend you seek professional advice tailored to your specific personal situation.  We only provide subdivision tax advise to existing or new ongoing clients.