Buying commercial property in New Zealand: will you pay GST, or is it zero-rated?

Usually, no. When a GST-registered seller sells land or a building to a GST-registered buyer who will use it in a taxable business, and nobody in the buyer’s family will live there, compulsory zero-rating applies and GST is charged at 0%. Buyers end up paying 15% when they aren’t registered by settlement, plan to live on the property, or give the seller wrong information.

That’s the short answer. The longer one matters because buying your own premises is the biggest cheque most owners ever write, and 15% of a commercial property’s price is real money. On a $650k workshop, it’s $97,500, which is probably more than the deposit you’ve been saving for.

What is compulsory zero-rating, in plain words?

It’s a GST rule that’s been in force since 1 April 2011. Most land sales between two GST-registered parties are charged GST at 0%. The seller puts the sale in their GST return as zero-rated and pays no GST on it. The buyer pays no GST and claims nothing back.

Inland Revenue’s interpretation statement on the rules, IS 17/08, explains the reasoning. Before 2011, a buyer could claim a large GST refund on a property while the seller’s company was wound up before paying that GST to Inland Revenue. Zero-rating removes the refund, and with it the incentive. It also helps the buyer, who no longer has to find 15% on settlement day and wait to get it back.

It isn’t optional, either. If the conditions are met, the sale must be zero-rated, whatever the contract assumed.

What conditions must be met at settlement?

Every one of these has to be true at settlement, not when you sign:

Condition	What it means in practice
The sale includes land	Buildings, bare land, a leasehold interest and most property deals qualify
The seller is GST-registered	Selling as part of their taxable activity, not their private home
The buyer is GST-registered	Registered, or liable to be, by settlement day
The buyer will use it for taxable supplies	Running a GST-registered business from it, or leasing it out commercially
No part is a home for the buyer or a relative	Not intended as the principal place of residence of the buyer, or anyone related by blood, marriage, civil union, de facto relationship or adoption

Two details catch people out. First, “registered” includes being liable to register. If your expected taxable turnover is over the $60,000 threshold (see Inland Revenue’s registering for GST page), the rules can treat you as registered even if you never got round to it. Second, the home test covers any part of the land. A flat above the shop you plan to live in is enough to take the whole sale out of zero-rating.

How does the seller know your GST position?

You tell them, in writing, at or before settlement. The GST Act requires every buyer of land to tell the seller three things:

1. whether you are, or expect to be, GST-registered at settlement;
2. whether you’re buying the property to use for taxable supplies;
3. whether you or a relative intend to live there.

In most deals this is done in the GST section of the standard ADLS/REINZ agreement for sale and purchase. It’s a schedule many buyers fill in quickly while thinking about finance clauses and building reports. Slow down for this one. The seller is entitled to rely on what you’ve told them, and if your circumstances change before settlement, Inland Revenue expects you to update the seller in writing.

The three ways business buyers end up paying 15%

1. The property entity isn’t registered by settlement

This is the most common one. Many owners buy their premises through a separate company or trust and lease the building to their trading business, which is often sensible for liability and succession reasons. The trap is that the new entity has no GST number on settlement day.

The trading company being registered doesn’t help, because it isn’t the buyer. Leasing commercial premises to your trading company is a taxable supply, so the property entity can usually register. Voluntary registration is open to businesses under the $60,000 threshold too. Do it early. The tests are applied at settlement, so you can tell the seller you expect to be registered by then. The registration has to actually be in place, though.

2. You plan to live on the property

Shop-with-flat, a farm with the house, or a motel with a manager’s unit you’ll live in yourself: if any part is intended as your (or a relative’s) main home, compulsory zero-rating is off. A GST-registered seller will usually charge 15%. If you’re registered, you can generally claim back the share that relates to your business use, but you have to fund all of it at settlement first.

3. The paperwork says one thing and reality says another

You told the seller you’d be registered and using the building in the business, then nominated a different entity to settle, or plans changed and nobody updated the agreement. If a sale is zero-rated on wrong information and that comes out after settlement, the GST Act treats the buyer as if they made the sale. You owe the GST, plus any interest and penalties. That’s the worst version, because it lands months later with no seller to share it.

If you’re weighing up a premises purchase and want to know what you could borrow before you commit, you can check what you might qualify for in about a minute.

Does “plus GST (if any)” or “GST inclusive” change anything?

It changes who carries the cost if the GST treatment shifts. Inland Revenue notes that the commercial effect of a change in GST treatment depends on whether the price is stated as GST-inclusive or “plus GST (if any)”.

• “Plus GST (if any)”: if the sale is zero-rated, you pay the price. If it’s standard-rated, you pay the price plus 15%.
• “Inclusive of GST”: you pay the same total either way. If it’s standard-rated, the seller hands 15% of what you pay to Inland Revenue and nets less.

Most commercial agreements use “plus GST (if any)”. That’s why the buyer’s registration status is worth getting right.

An illustrative example: a Blenheim engineering workshop

This is a made-up example to show the arithmetic. It isn’t a real business, and your accountant and lawyer should confirm the treatment for your own deal.

An engineering business in Blenheim has rented its workshop for nine years. The landlord, who is GST-registered, offers to sell it for $650,000 plus GST (if any). The owners set up a new property company to buy it and plan to lease it to their trading company for $48,000 a year plus GST. That’s under the $60,000 threshold, so the property company won’t be registered unless it chooses to be.

	Property company registered before settlement	Property company not registered at settlement
Is compulsory zero-rating available?	Yes, if the other conditions are met	No
GST charged by the seller	0%	15%
Paid at settlement	$650,000	$747,500
GST to recover	None	$97,500, and recovering any of it later depends on adjustment rules your accountant would need to work through
Extra cash needed on the day	Nil	$97,500

The difference between the two columns is one GST registration, done a few weeks earlier. The owners register the property company voluntarily, tick the right boxes in the agreement and settle at $650,000.

Now change one fact: one owner plans to move into the flat at the back. Zero-rating is off, the seller charges 15%, and the GST-registered buyer can only claim back the business-use share in its next return. Even that recoverable share has to be funded on settlement day. It sits outside the business until the refund arrives, which for a two-monthly filer could be several weeks. Our page on GST filing frequency explains how your cycle sets that timing.

What about buying the business and the building together?

If you’re buying a going concern that owns its premises, two zero-rating rules may apply at once. Inland Revenue’s view in IS 17/08 is that the going-concern rule and compulsory zero-rating “can both apply to the same supply”. For the property, the land rules decide it. The going-concern side, price allocation and working capital are covered in our guide to buying a business in New Zealand.

Does Investment Boost help with the building?

Only for new buildings. Inland Revenue’s Investment Boost guidance allows a 20% deduction for “new commercial and industrial buildings” first available for use on or after 22 May 2025. Second-hand assets sourced from New Zealand are excluded, so an existing workshop bought from a local landlord won’t qualify. Land never does. The fit-out and new plant you put into the building may be a different story, so ask your accountant.

A pre-settlement GST checklist

• Decide which entity is buying, and confirm it will be GST-registered on settlement day.
• Confirm the entity will use the property for taxable supplies, whether that’s trading from it or leasing it commercially.
• Be clear on whether anyone in the family will live on any part of the property.
• Complete the GST section of the agreement carefully, and update the seller in writing if anything changes.
• Check whether the price is “plus GST (if any)” or GST-inclusive, and model both outcomes.
• If 15% might apply, plan the cash for settlement day and the wait for any refund. Our GST set-aside guide and GST and provisional tax planner help with the timing.
• Budget for life after settlement too: legal costs, any fit-out, and the cash the business still needs to trade.

Owning your premises is a growth decision, so fund it like one

Buying the building you work from changes the business. Rent becomes equity, nobody can refuse to renew your lease, and the fit-out you pay for stays yours. It also draws on the same pool of cash the business needs to keep trading. As our feature on why growth eats cash explains, even a good move can leave the business short in the months that follow.

That’s where we help. We work with New Zealand owners on property-secured lending from $20,000 to $5,000,000 and unsecured or cash-flow funding for trading businesses, typically $5,000 to $500,000, sized on turnover and bank statements. That might mean topping up a deposit, covering a GST timing gap, paying for the fit-out, or keeping working capital healthy after settlement. A patchy credit history or an IRD balance doesn’t rule you out; we look at each one on its merits, and all lending is for business use. Our page on funding a growth plan covers when borrowing makes sense.

Enquiring takes about 60 seconds, and there’s no credit check when you first enquire. We don’t send your details to a pile of lenders, so you won’t spend the next week fielding calls from strangers. A real person reads what you’ve told us about the property, the price and your settlement date, then calls you to talk through the options. One request: answer the form accurately. Honest figures for trading income, the purchase price and what you’re short mean the first conversation is about real options, matched properly the first time.

See if you qualify →