House flippers beware
People who are buying and selling properties for profit are being warned they could get a tax bill, even if they hold the house for longer than two years – and even if they have lived in it themselves.
The bright-line test has now been reduced to two years, which means that investors who hold a property for at least that long are not automatically handed a tax bill for any gains they make on the property.
Inland Revenue recently released a tool that would help people to understand whether their property was taxable under any of the land taxing rules.
That would include people who bought a property intending to resell it, no matter how long they held it, or had a history of buying and selling that could have them count as a dealer, as well as those captured by the bright-line rule.
As part of that, the department noted that its next area of focus in the property sector would be speculators who frequently bought and sold. Any property that is bought with the intention of sale can be taxed, irrespective of the bright-line test.
The Inland Revenue Department had an information sharing agreement with Land Information New Zealand (LINZ) which would prompt it to contact people it had concerns about.
Inland Revenue said there was no hard and fast rule about the number of times that people could buy and sell or renovate and sell houses and not be taxed but generally three prior transactions would be needed for there to be a regular pattern.