Electing non taxable treatment for land and vehicles NZ

A GST registered sole trader can keep a family home, a farmhouse, or a mainly private vehicle out of output tax on sale. Inland Revenue lets you elect to treat those goods as non taxable supplies when their principal purpose is not making taxable supplies, and you have not claimed GST on them (apart from non integral deductions).

GST is charged at 15% on taxable supplies in New Zealand. The election is how a registered person stops a mainly private asset being treated as part of the taxable activity when it is sold, or when GST registration is cancelled and the goods are still on hand. Inland Revenue’s GST adjustments page (last updated 31 March 2026) limits the option to goods such as land, dwellings, and vehicles. GST guide IR375 (March 2026) uses the same three examples.

This is a GST Act 1985 rule, not the income tax land sale rules. Bright line, purpose of disposal, and associated person tainting sit in the Income Tax Act 2007. They can still apply to the same sale. Work the GST election first if the question is “do I add GST on the agreement”, then get income tax advice on profit. Figures below are working papers copied from Inland Revenue and the Act, not an assessment.

The IRD adjustment option in one line

If you did not get or use the goods for the main purpose of making taxable supplies, you can choose to treat them as non taxable supplies. You will not have to add GST to any future sale, or make an adjustment if you keep the goods when you cancel GST registration. After the tests are met, you do not monitor use at the end of each GST adjustment period.

Do you qualify to elect?

Walk the four tests in GST Act 1985 section 6(3)(e). Fail any one and the sale stays in the GST net, or you stay on ordinary change in use adjustments. Category home: Property & Assets GST Hub.

Is it land, a dwelling, or a vehicle? Inland Revenue and IR375 both say the election applies only to goods such as land, dwellings, and vehicles. Tax Policy’s special report (4 April 2023) says the rule is limited to goods, not services, and is aimed at tangible assets with mainly private or exempt use, not brands or intellectual property.

Have you claimed GST on the goods themselves? Section 6(3)(e)(i) requires that you have not previously claimed a deduction under section 20(3) for the goods before they are sold, excluding non integral deductions. A claim on the purchase price, or on capital work that became part of the house, blocks the election.

Was principal purpose private or exempt, from day one to sale? The goods must not have been acquired for the principal purpose of making taxable supplies, and must not have been used for that principal purpose. Tax Policy says principal purpose means the main, primary, or fundamental purpose. It does not necessarily equate with a more than 50 percent test.

Was the purchase zero rated? Section 6(3)(e)(iv) blocks goods acquired as zero rated supplies under section 11(1)(m), (mb), (mc), or (md), unless you have chosen to return the nominal GST component as output tax under section 20(3J)(a)(iv). That is Gavin’s $150,000 debit, not a smaller slice.

Situation	Can you elect?	Why, on Inland Revenue’s page or the Act
Farmhouse mainly a private residence, seller not GST registered, no GST claimed on the house or capital improvements	Yes	Rebecca’s Inland Revenue example. Farming land stays assessable for GST. She can still claim part of rates, insurance, and utilities on the taxable percentage of the farmhouse.
Home garage used to store hire bikes, no GST claimed on the house, GST claimed on bike hooks and shelving	Yes	Charlie in Tax Policy’s special report. The hooks and shelving do not form an integral part of the dwelling.
Holiday home bought zero rated for $1 million, full $150,000 nominal GST returned	Yes, if use does not change	Gavin’s Inland Revenue example. Returning the full nominal GST amount puts him in the same place as someone who was charged GST and claimed none.
Same holiday home, only $105,000 returned on 70 percent expected non taxable use	No	Tax Policy’s special report. The election needs the full nominal GST component, not the smaller 20(3J) slice.
Dwelling with 20 percent office, GST claimed on purchase and on substantial renovations	No	Vincent in Tax Policy’s special report. A deduction was claimed on acquisition, and on improvements that became an integral part of the dwelling.
House built or developed to sell, or trading stock	No	Tax Policy: goods fail the test if their principal purpose involves the registered person selling those types of goods as their taxable activity.

How the election is made

You do not fill a special Inland Revenue form for section 6(3)(e). Tax Policy’s special report says the registered person elects by taking a tax position of not charging GST at the time they sell or otherwise dispose of the qualifying goods, and not accounting for a taxable supply of the goods in their next GST return. You will not generally have to disclose that election to the Commissioner. You simply do not claim deductions for the secondary taxable use of the asset, and you do not return output tax on disposal.

IR375 is explicit on what that buys you. If you choose to treat a good as a non taxable supply, you do not have to pay GST on any future sale of the good, or the deemed supply that occurs when you cancel GST registration. Section 5(15) of the GST Act 1985 then treats a supply you elect under section 6(3)(e) as a separate supply from any other real property in the same deal. That is how a farmhouse can sit outside GST while the paddocks stay in. Cancelling GST registration is where the deemed supply usually bites if you never elected.

Pull highlight: Tax Policy dates section 6(3)(e) from 1 April 2011. A GST position that already treated a dwelling as outside the taxable activity is now correct, unless an assessment had already been made for that supply before 30 August 2022.

Land, dwellings, and vehicles are not the same job

The election is the same statutory test. The day to day file is not. A farmhouse can still have a home office. A ute can still do the school run. Inland Revenue’s claiming GST page (last updated 1 April 2023) still says you can only claim GST to the extent goods and services are used in your taxable activity to make taxable supplies.

Land and dwellings

Claim running costs on a fair percentage (floor area and, in IR375, time spent on income earning activities). Do not claim the purchase of the property or capital improvements if you want the election later. IR375 warns those capital claims may make a future sale subject to GST on the full sale amount. Compulsory land zero rating is a different switch: zero rating of land transactions NZ. Dwelling meaning: dwelling vs commercial dwelling NZ.

Vehicles

Inland Revenue’s Amy example is a car for $10,350 including GST of $1,350, mainly private, 10 percent business. Exclusive cost is $10,000 or less. Principal purpose gives no claim. Apportionment lets her claim 10 percent of the GST, then she must use that method on all goods or services at $10,000 or less exclusive for at least 24 months. If she claims, she cannot later elect. If she claims nothing and principal purpose stays private, the election can keep a later sale out of output tax. Logbook walkthrough: GST on motor vehicles and claim GST on a car or home office.

Tax Policy is also clear on leases. Where land or dwellings are provided by way of a lease, GST on the rent is decided under other GST rules, such as whether the lease is consideration for an exempt supply of accommodation in a dwelling or for a taxable supply of services. Electing on a later sale of the freehold does not rewrite the rent file. Introducing a private asset into the taxable activity is a different first step: introducing private assets into a GST registered business NZ.

What people get stuck on

PropertyTalk threads still ask whether GST registering a trust for a new farm automatically puts the old lifestyle block into output tax. Inland Revenue’s answer is the four tests, not the fact of registration. If the old block was never acquired or used for the principal purpose of making taxable supplies, and no GST was claimed on it, the election (or simply treating it as outside the taxable activity) is the Rebecca pattern. The new trading land is a separate activity. GST on property sales NZ and farming and agriculture GST sit beside that split.

Geekzone threads on home offices mix income tax floor area with GST capital claims. IR375 lets you claim GST on the portion of running costs relating to the taxable activity. That is Rebecca’s rates and power. Claiming GST on buying the house, or on a new wall and wiring, is Vincent. Those are not the same claim.

Use case: Rebecca, Inland Revenue

Situation: GST registered small farm. Farmhouse used to help run the business, main purpose is her private residence. Purchase was not zero rated. No GST claimed on the house or capital improvements. GST: She can elect a future sale of the farmhouse as a non taxable supply. Farming land stays in GST. Action: Keep claiming only the taxable percentage of operating costs. Do not start claiming GST on a kitchen renovation if you want the election to survive.

Use case: Gavin, Inland Revenue

Situation: GST registered person buys a holiday home for $1 million from another GST registered person. Sale zero rated. Main purpose is private recreation, with some short stay. GST: Return output tax of $150,000 in the next GST return if you want a later disposal to be non taxable. Action: Do not return only the private use slice if the plan is to keep the house out of GST on sale.

Inland Revenue’s Gavin numbers, copied as published: holiday home $1 million, zero rated. Nominal GST that would have been charged if the purchase was not zero rated: $150,000 returned as output tax.

If you already claimed GST on the land

The election is closed once a deduction under section 20(3) has been taken for the goods (other than non integral deductions). You then sit in ordinary adjustments. Inland Revenue’s concurrent use of land page is the other IRD adjustment option people mix up with this election. If land is used for taxable and non taxable purposes at the same time, the taxable percentage is (consideration for taxable supply divided by total consideration for supply) × 100%. Consideration for taxable supply is the amount derived on disposal, or market value at adjustment if it has not been disposed of. Total consideration adds rental income derived or treated as derived.

Lee’s bungalow is not the election

Inland Revenue’s concurrent land example: Lee buys a bungalow for $230,000, claims $30,000 GST, then rents it as residential (non taxable for GST) while still intending a taxable sale. Market value $360,000, rental $26,000. Adjustment: $360,000 divided by $386,000 × 100 = 93% retained, so 7% of $30,000 = $2,100 to pay back on the next return. She claimed GST. Section 6(3)(e) is not available. That formula is on Inland Revenue’s GST adjustments for taxable and non taxable use of land page (last updated 28 April 2021), with more in Tax Information Bulletin Volume 23 No. 1 (February 2011).

The “get the GST back on the house” trap

Deloitte’s 2024 GST on housing note records the horror story: convert a house to short stay or run a business from home, claim GST on costs, then meet output tax on a later sale after values have risen. IR375 says claims for the purchase of the property itself or capital improvements to your home may make a future sale of the property subject to GST on the full sale amount. The election exists to keep a principally private house or vehicle out, but only if you never took the capital deduction. A developer selling trading stock cannot elect. A holiday home whose principal purpose is paid guest stays cannot elect.

Section 91 closed on 1 April 2025

GST Act 1985 section 91 was a 24 month bridge for goods acquired before 1 April 2023 where a deduction had already been claimed, or the goods were acquired zero rated. You had to notify the Commissioner before 1 April 2025 and return a set amount of output tax. That notice window has closed. If you already completed a section 91 election in time, section 91(4) can still keep a later disposal out of GST provided you have not claimed a further deduction for the goods (excluding non integral deductions) and you have not used them for the principal purpose of making taxable supplies. If you missed 1 April 2025, you cannot use section 91 now. You are back on ordinary adjustments, not a late election.

FAQs

How do you elect non taxable treatment for land or a vehicle in NZ?

You elect by taking a GST position of not charging GST when you sell or otherwise dispose of qualifying goods, and by not returning that disposal as a taxable supply in your next GST return. Inland Revenue’s GST adjustments page (last updated 31 March 2026) says you will not have to add GST to any future sale of these goods or make an adjustment if you keep these goods when you cancel GST registration. Tax Policy’s special report (4 April 2023) says you will not generally have to notify the Commissioner of an election under section 6(3)(e) of the GST Act 1985.

Can you still claim GST on rates and insurance after you elect?

Yes, on operating costs that do not become an integral part of the land, dwelling, or vehicle. Inland Revenue’s Rebecca example says she can still claim part of her operating costs (such as rates, insurance and utilities), based on the percentage of the farmhouse used for making taxable supplies. IR375 (March 2026) says non integral deductions are deductions for other goods or services that do not make a substantial improvement to the main goods and do not become so important that the main goods are incomplete or unable to function without them.

What if you bought the house as a zero rated land supply?

You can still elect if you return the full nominal GST component as output tax. Inland Revenue’s Gavin example: he buys a holiday home for $1 million from another GST registered person, the sale is zero rated, and he can choose to make a future disposal a non taxable supply by returning output tax of $150,000 in his next GST return. GST Act 1985 section 20(3J)(a)(iv) lets the recipient attribute the full nominal GST component if the person intends to apply section 6(3)(e) on disposal. Tax Policy’s special report says returning only the non taxable use slice (Gavin’s $105,000 alternative) means a later disposal would not satisfy section 6(3)(e).

Read Inland Revenue’s GST adjustments for business, private and exempt use, GST adjustments for taxable and non taxable use of land, change in use adjustments, GST guide IR375 (March 2026), GST Act 1985 section 6, and Tax Policy’s special report on GST apportionment and adjustment rules (4 April 2023). Publisher path: About Us and Contact Us.

Last verified 5 September 2026 against Inland Revenue GST adjustments (31 March 2026), concurrent use of land (28 April 2021), change in use (1 April 2026), claiming GST (1 April 2023), GST at 15% (IRD GST page), GST guide IR375 March 2026, GST Act 1985 sections 5(15), 6(3)(e), 8(1), 20(3J), and 91, and Tax Policy’s special report 4 April 2023. Ads may fund this free site. Not tax advice. Figures are working papers, not an Inland Revenue assessment.