Am I missing the point on this one. I’m hearing there is no capital gains tax on New Zealand Investment property when the time comes to sell…sounds great so far. I have just read an article on the home page in “The New Zealand Herald” on “Intent dertermines taxes on property sale” what is said basically was if you buy the property with the intent of renting it out then when you come to sell it you got slugged with taxes on the profit. Isn’t that capital gains tax? It also said that with the property boom happening over there, the tax man was rethinking policies on allowing deductions.
What do you New Zealand guys reckon – Dreamcatcher, Weston and Mimimogal loved to hear your analysis on this – am I misreading this?
Bindibindi
Hi Bindi,
The article you’re referring to in the NZ Herald was by Simpson-Grierson, a well known law firm in NZ.The issue of “intent” when purchasing investments is to determine whether or not a person can be deemed a “trader” in those investments. ie if the sole purpose for purchasing a property was to on-sell it the next day then you would be deemed a trader and be taxed on the capital gain.
In most cases investors are buying the property for the cashflow or income. In these cases you are not a trader and therefore exempt of capital gains tax.
You can still buy property and on sell it quickly and not be taxed but it depends on how the bulk of your income is derived.
If you do trade in properties regularly and are deemed a “trader” by the inland revenue dept it will create another problem which is termed “tainting”. This basically means, once a trader always a trader in which case all capital gains will become taxable – property developers often fit into this category.
Cheers
Jeffif you hold it for a year that seems to convince the tax dept. that your intention was to buy and hold and you’re not a trader. therefore no CG tax.
if you’re a trader, buying and selling all the time, or quickly, and the profits form your income, then yes they tax you.
i’m sure that’s what I’ve read somewhere, but then again don’t quote me, I’m not a tax professional, just a fellow investor
joy to the world
Thanks guys, am checking with as many accountants that I can talk to and its looking good.
Bindibindi
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