Income tax: capital gains: does New Zealand Goods and Services Tax (GST) incurred by an Australian taxpayer on the acquisition of a New Zealand property form part of the cost base of that property?

Yes. Under the provisions of section 160ZH of the Income Tax Assessment Act 1936, the cost base of an asset includes the amount of incidental costs incurred by a taxpayer in the acquisition of an asset. Incidental costs, as defined in paragraph 160ZH(5)(b), cover costs of transfer. New Zealand GST is considered to be a cost of transfer.

Under the New Zealand GST legislation, the purchaser of any property in New Zealand becomes liable for the GST on settlement. At the time of settlement, the purchaser pays the GST to the seller who then pays it to the New Zealand Inland Revenue.