From 1 April 2011 GST will be set at 0% for nearly all land transactions between GST registered parties. This compulsory zero-rating is designed to prevent the IRD having to pay out GST refunds to purchasers where the vendors have not returned the GST. It should also make things simpler, for example it will reduce the need for GST offsets.
These new rules will apply whenever the transaction is between GST registered parties and the purchaser intends to use the land for making supplies that are subject to GST. This is determined at the time of settlement. The purchaser will need to provide a written statement as to their intentions on or before settlement.
Transitional rules apply if the agreement is entered into before 1 April 2011 and the GST time of supply is triggered on or after this date. The vendor can opt for compulsory zero-rating if they wish to. Existing agreements should be checked and discussed with your accountants.
An addendum is being prepared for the ADLS/REINZ agreement for sale and purchase of land to address these changes.
There are also changes where a nomination occurs. These become one transaction for GST purposes, essentially a sale from the vendor to the nominee.