Not everything sold in New Zealand attracts 15% GST. Some supplies are zero-rated — meaning GST applies at a rate of 0%. Others are GST-exempt — meaning GST does not apply at all. These categories sound similar but have very different effects for businesses, particularly when claiming back input tax credits.
Zero-rated supplies have 0% GST — but the supplier is still registered for GST and can claim input tax credits on related purchases. GST-exempt supplies (e.g., residential rent, financial services) sit completely outside the GST system — the supplier cannot claim input credits on expenses related to exempt supplies. The key practical examples of zero-rating: exported goods and services, land transactions between GST-registered parties, and some international transport.
Zero-Rated vs Exempt — The Critical Difference
| Feature | Zero-rated (0% GST) | Exempt |
|---|---|---|
| GST charged to customer | 0% | None |
| Supplier can claim input tax credits | Yes | No |
| Included in GST return | Yes (as zero-rated supplies) | No (excluded from GST return) |
| Example | Exported goods | Residential rent |
Why zero-rating matters: A supplier of zero-rated goods pays no GST to IRD on sales but can still claim back GST on its costs. This prevents GST from cascading through the supply chain for goods that leave NZ.
Why GST-exempt matters: A supplier of exempt supplies (e.g., a landlord renting residential property) cannot claim input credits on expenses — even though those expenses include GST. The GST on costs is a real cost to the exempt supplier.
Common Zero-Rated Supplies in NZ
1. Exported Goods
Goods physically exported from NZ are zero-rated. The GST rate is 0%, meaning the overseas buyer pays no NZ GST. The exporter claims back all GST on their NZ costs.
Requirements:
- Goods must physically leave NZ within 28 days of supply
- The supplier must hold evidence of export (shipping documents, Customs clearance)
2. Services to Non-Residents
Services performed for a non-resident who is outside NZ when the services are performed are zero-rated:
- Consulting or advisory services delivered to an overseas client
- Software development for an overseas company
If the non-resident is physically in NZ when receiving the service, standard 15% GST applies.
3. Land Transactions Between GST-Registered Parties
The sale of land (and some buildings) between two GST-registered parties is zero-rated. This prevents a large GST amount changing hands on commercial property deals — the buyer would claim it all back anyway, creating unnecessary cash flow issues.
This applies when:
- Both the seller and buyer are GST-registered
- The buyer intends to use the land to make taxable supplies
If the buyer is NOT GST-registered (e.g., buying a property for private use), normal GST rules apply (the sale may include GST at 15%).
4. International Air and Sea Transport
Transport of passengers or goods from NZ to an overseas destination is zero-rated — the international leg only. Domestic legs remain taxable at 15%.
5. Certain Financial Services (Some Are Exempt, Some Zero-Rated)
Interest on loans to non-residents can be zero-rated in certain circumstances. Financial services between registered financial service providers may have complex mixed treatment — specialist GST advice is essential in this area.
GST-Exempt Supplies in NZ
These supplies are completely outside the GST system. The supplier charges no GST and cannot claim input credits:
| Exempt supply | Notes |
|---|---|
| Residential rent | Renting a house or flat to tenants — entirely exempt |
| Financial services | Interest charges, lending, insurance premiums, credit card fees |
| Donated goods sold by non-profits | Under certain conditions |
Residential accommodation: Residential rent is one of the most important examples. Landlords renting residential property cannot claim GST on property costs (rates, repairs, insurance), because those costs relate to an exempt supply.
Mixed Supplies — When Some Is Taxable and Some Is Exempt
Some businesses make both taxable (or zero-rated) and exempt supplies. For example:
- A bank makes taxable supplies (fee-based services) and exempt supplies (interest on loans)
- A holiday park lets some properties short-term (taxable) and some long-term (exempt)
For mixed supplies, you must apportion input tax credits: $$\text{Claimable GST} = \text{Total input GST} \times \frac{\text{Taxable and zero-rated supplies}}{\text{Total supplies}}$$
IRD has guidance on apportionment methods for mixed-use businesses.
Practical Tips for Zero-Rating
- Exporters: Keep shipping records and export documentation to support zero-rating. IRD may audit zero-rated supplies.
- Property transactions: Always confirm whether both parties are GST-registered before settling a property sale. A mis-classification can create a large unexpected GST liability.
- Service exporters: Confirm the non-resident is outside NZ at the time of supply. If uncertain, charge 15% and let the customer seek a refund — charging 0% incorrectly creates an underpaid GST liability.
Frequently Asked Questions
If I export goods, do I include the zero-rated sales in my GST return?
Yes — zero-rated supplies are included in your GST return as taxable supplies at 0%. They contribute to your total sales figure but generate no output tax. This allows you to claim back the input tax on related purchases.
I rent out a residential property. Can I register for GST to claim back costs?
No — residential rent is exempt, so you cannot register for GST on residential rental income alone. Even if you were registered (for another business activity), you cannot claim input credits on residential rental costs.
Is Airbnb zero-rated or taxable in NZ?
Short-term accommodation (Airbnb, holiday houses rented for less than 28 consecutive days) is taxable at 15% — not zero-rated and not exempt. If your Airbnb income exceeds $60,000/year, you must register for GST. See our Airbnb Tax NZ guide.
The sale of my commercial property to a GST-registered buyer — is it zero-rated?
Yes — if both parties are GST-registered and the buyer intends to use the property for taxable activities, the sale is zero-rated. This must be documented and agreed between parties before settlement.