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The current Mixed use asset rules add complication and yet have limited application. The rules are only applicable to a limited amount of assets such as holiday homes, aircraft and boats when they are used in a particular way.

Furthermore, many holiday homes that would otherwise become subject to these mixed asset rules can become excluded from taxable activity due to due to the exempt supply rules.

What is changing?

The proposed amendments will allow registered persons to elect to treat the supply of goods that were not acquired for the principal use of making as exempt. This will align the GST rules with current practices for GST registered persons who have minor use of their private dwellings in the making of taxable supply.

This exemption is limited to goods. More on the rules for what is exempt here.


In order for the exempt supply election to be available, the dwelling must not have been:

  1. Acquired for the principal purpose of making taxable supply
  2. Used for principal purpose of making taxable supplies: The primary use of goods from when they are acquired to when they are disposed of must be for private/ exempt use, not taxable use. The good can also not have been sold in the furtherance of taxable activity. 
  1. Acquired as a zero-rated supply

The registered person must have a taxable activity that is a going concern at the time of supply and capable of continuing as a going concern.

Example 1

Ruben is a registered person and acquires a dwelling that was not zero-rated supply when acquired. He did not claim any deduction for the acquisition or capital improvements of the building. Although the dwelling is partially used to run Rebecca’s taxable activity of farming, the principal purpose is as a private residence. He has claimed deductions for operating costs such as insurance, utilities and local rates based upon the percentage on which the dwelling is used to produce taxable supplies. When Ruben sells the dwelling, under the proposed amendments, he can elect to treat the sale as an exempt supply of goods.

Example 02

Victor has acquired a dwelling for $920,000 from an unregistered person. He intends to use 20% of the dwelling to make taxable supplies for his GST registered business. He therefore claims 24,000 (20% of GST fraction of purchase price). He later spends $23,000 on substantial renovations and claims $3000 for them.

This dwelling would not qualify for the exemption as the relevant deductions have been taken for both acquisition and improvements. So, as the dwelling has been used partly to make taxable supplies, it will be a taxable supply when sold.

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New Zealand Tax Accountant.