Refresher About 1 October 2015 Changes
24 September 2015
REFRESHER ABOUT 1 OCTOBER 2015 CHANGES
So why the new rules?
- 25.8% of Auckland dwellings sold within two years. (8.4% 1 year, 17.4% 2 years).
- North Auckland 59% of new property titles changed in 12 months (29% in 3 months and 30% in 9 months).
Further to my newsletter sent out on 3 September 2015, here is an update on some of the key points for you:
Conveyancing/Information Reporting Bill
- Trusts will need an IRD number and New Zealand bank account.
- Applies to all agreements entered into on or after 1 October 2015.
- Applies to all transfers of title which occur post 1 April 2016, even if contract entered into pre 1 October 2015.
Possible Withholding Tax on Sales of Property by Foreign Owners
- Withholding tax based on lower of:
- 33% of vendor's gain (standard rate)
- 10% of total purchase price (default rate)
- Not a final tax
- Most likely to apply as from 1 July 2016.
Bright-Line Test for Residential Land
- Watch restrictions!!!
- If taxpayer sells "residential land" within two years of acquisition, it will be taxable.
- Unless personal home exemption
- Any loss ring fenced and can offset any Bright-Line profit.
- Only applies to a purchase of the property where the Sale & Purchase Agreement is entered into on or after 1 October 2015. So if you have an existing rental, it will not be affected by new rules, unless you restructure it.
- Start date for 2 years = Settlement date ] Shortest
- Sale date for 2 years = Date of Sale & Purchase Agreement ] possible time
- Current tax laws still apply. So if you buy a property with the intention of selling for a profit in November 2015, then sell 2 1/2 years later, the gain is still taxable as intention was to sell for a profit.
- Lifestyle Blocks:
- Most will not qualify for the main home exclusion.
- So most likely taxable gain if sold within 2 years once the rules apply!!
Click here to see my earlier Blog on this topic.
Kind regards
Ross Barnett
