New Zealand Inland Revenue has released a draft interpretation statement for public consultation on the GST reduced value rule under section 10(6), which applies a 9% effective GST rate to domestic goods and services supplied in long-stay commercial accommodation.
New Zealand Inland Revenue has released a draft interpretation statement for public consultation on Goods and Services Tax – Reduced value rule in s 10(6) for supplies of domestic goods and services in commercial dwellings on 17 April 2026.
The GST reduced value rule under section 10(6) of the Goods and Services Tax Act 1985 allows a concession for long-stay accommodation in commercial dwellings. It treats the value of “domestic goods and services” as reduced to 60% of the actual value, resulting in an effective GST rate of 9% instead of the standard 15%.
The aim is to ensure that long-term occupants in commercial accommodation are not disadvantaged compared with residential tenants, where accommodation is generally GST-exempt.
The rule applies only where the accommodation qualifies as a commercial dwelling, such as hotels, motels, hostels, boarding houses, bed and breakfasts, serviced apartments and rest homes. It covers “domestic goods and services” linked to occupancy, including utilities, cleaning, maintenance and basic amenities, but excludes items such as meals, personal laundry, toll calls and medication. The supply must also be made to an individual, and does not apply to head-leases involving organisations sub-leasing the accommodation.
The timing of the reduced GST rate depends on the structure of the stay. Under the main rule, the 9% rate applies from the fifth week of occupation. Under the proviso, it applies from the first week where the accommodation qualifies as a residential establishment, and there is an upfront agreement for stays exceeding four weeks.
The interpretation statement also clarifies that the rule does not apply to accommodation supplied through electronic marketplaces. Providers can still claim full input tax credits, while the reduced value applies only to output tax. Inland Revenue also notes simplified GST rates for specific sectors, including 12.3% for rest homes and 12.9% for private hospitals. Where a stay includes both eligible domestic services and other services, such as meals, suppliers must apportion GST on a fair and reasonable basis.
The consultation period ends on 29 May 2026.
