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Investors who flip properties are currently subject to the bright line test, but owner-occupiers are not. That is now set to change.
By Miriam Bell
Wednesday 19 June 2019
Popular home renovation TV shows like The Block NZ make the purchasing, renovating and selling of properties in rapid turnaround seem an attractive option for homeowners.
Every year huge audiences tune in to The Block’s auction finale to see what prices the quickly renovated properties generate – and it’s presented as an aspirational option to earn some fast cash.
And it is: that’s what property trading is after all.
But here’s the thing. While it is considered an unfair distortion of the market when investors flip properties, it has not been viewed the same way when owner-occupiers do it.
That has meant that while investors who buy-renovate-and sell properties within five years have been subject to the bright line test and have to pay tax on their gains, those who do the same with the family home usually do not.
Now that situation is set to change.
The Government has announced that, as recommended by the Tax Working Group, virtually all those who buy and sell property will now be required to provide their IRD number on land transfer documentation.
Revenue Minister Stuart Nash says the move is to gain greater oversight of land transfer information to ensure people buying and selling properties are complying with tax rules on property speculation.
“Most people already provide their IRD number to Land Information NZ when buying and selling property, but there are some exemptions which are open to manipulation. Up to one-third of land transfers are made without a record of the IRD number of the buyer or seller.”
Introducing the requirement for everyone to provide an IRD number will enable Inland Revenue to better determine if tax rules are being manipulated.
Nash says that if a homeowner regularly buys and sells their properties in a short time frame it suggests they are engaged in property speculation and are flipping properties with the intention of creating income.
“When the previous government introduced the bright line test in 2015, it made it clear that owner-occupiers with a regular pattern of buying and selling residential properties had to comply with the bright line rule in certain circumstances.
“If an owner-occupier buys and sells properties……….
Continue reading this article at the original source from Landlords.co.nz
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