Chartered Accountants & Tax Specialist
General update by IBBZ Accounting on latest tax news, business growth and technology tips.
From 1 October 2015, the Parliament introduced some changes to the property rules called as Bright-line test. The purpose of the test is to reduce the number of foreign speculators on NZ property and thus maintain positive housing prices of big cities in New Zealand. This rule only applies to residential properties bought on or after 1 October 2015. The idea behind the test is that taxpayer has to pay tax on the gain when you selling your property (with some exceptions). By taxing on the gain, it somewhat discourages speculators for housings as the profit is not as good as before.
The rule says that taxpayer will pay tax when they buy or sell a residential property within two years, unless an exception applies. Other property rule still remains the same. It means that if you have any other residential property other than your main home and you sell it within two years, the gain on sale will become taxable.
Thus, the concept of main home under the bright line test is very important. The IRD defines the main home as taxpayer need to have used a property as their main home for 50% or more of the time that you’ve owned it. Moreover, taxpayer also needs to use more than 50% of the area of the property as your main home. This means that if you rent your house out and use less than 50% of the area in the house. You cannot use that property as your main house under the bright-line test. Other factors the IRD will take into consideration to determine the taxpayer’s main house as below:
Exclusion to the test
Information provided above is of general use only. If you intending to rely on above information consult us or seek professional advice. IBBZ Accounting or any of its employee is not responsible should the information above result in any kind of loss to you directly or indirectly.