Buying and selling residential property soon? You need to know about the upcoming changes because, with careful planning, you may still have a chance to take advantage of the old rules.
How things are:
- Currently you need to pay tax on gains made from residential property that is bought & sold within two years (with some exceptions like the main family home etc).
- The law is about to change so that gains made from residential property that is bought & sold within five years are taxable.
Applies from 29 March 2018
- The revised rule requires people who sell residential property within five years of buying it to pay income tax on gains from the sale, unless it’s:
– the main home
– inherited property
– received the property as a part of a relationship settlement
- If you bought residential property between 1 October 2015 and 28 March 2018 (inclusive) the original two year bright-line rule still applies.
- Generally the date you bought the property is the date the agreement to purchase was entered into.
- All existing property tax rules still apply (the intention test etc).
- The income should be shown as “other income” in your tax return and you’ll need to include a Property Sale Information Form (IR833).
We’ll let NSA Tax do the talking on this one:
The 5-year period will only apply to residential land where the date that the person acquires an estate or interest in the residential land is on or after the date on which the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act receives Royal assent.
The 2-year period will continue to apply to land where the first interest was acquired before the date of Royal assent. In most cases, the date that a person acquires the first interest in land is the date of the sale and purchase agreement
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Boutique Financial Chartered Accountants & Business Commentators
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