Are you on top of the new property tax rules?

If you have an investment property or you are considering buying one, you need to know about the property law changes which came into force on October 1st 2015.

Under past regulations, a property sale was taxable if the intention of the buyer was to sell the property for a profit. This rule was very difficult for IRD to impose as it was often hard to prove.

The following rules will now apply when any property is bought or sold, which means that you may have to provide extra information during the transaction.

What are the new rules?
  • Gains from residential property sold within two years of purchase will be taxed, unless the property is the seller's main home, inherited from a deceased estate or transferred as part of a relationship property settlement.
  • Non-residents and New Zealanders buying and selling property other than their main home must provide an IRD number.
  • Non-resident buyers and sellers must provide their tax identification number from their home country, along with current identification requirements such as a passport.
  • Non-residents must have a New Zealand bank account before they can get a New Zealand IRD number.
With these changes, overseas buyers will be treated the same as New Zealand investors. Ensuring all foreign investors must have a local bank account in order to get an IRD number also brings transparency around money laundering.

Some experts say this move from the Government is only a 'tweak' and will have a minimal impact on the heated Auckland property market. However, if you are thinking about investing you will need to take these changes into consideration when evaluating if buying property is the right kind of investment for you.

Thinking about investing in the property market?

If you are buying property as an investment, it is important to consider tax implications and ownership structures. It is also important to have the best mortgage structure.

Also of consideration is the new equity requirements for property investors which came into force on November 1st of this year. If you would like to read our previous article on this topic please click here.

Please note that we are not tax specialists and we recommend that you speak to a specialist tax consultant should you have any specific questions about property tax.

If you would like to speak to a Mortgage Adviser please contact us on mortgages@apexgroup.co.nz or 0800 500 510.
Image courtesy of Stuart Miles / Freedigitalphotos.net


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