The New Zealand property market is about to undergo a seismic shift.
From July 1, the bright-line tax rule for property investors and holiday homeowners will change from 10 years to just two years.
Any property (other than your primary residence) sold within two years of purchase will trigger a capital gains tax on the profit. The current rule states that owners must wait a decade from the purchase date.
Kiwis who don’t want to hold a property for a full 10 years or more are now moving to offload the asset as the two-year rule kicks in at the beginning of next month.
This move is designed to cool the housing market by making it more tax-effective to sell beyond the two-year period, rather than forcing Kiwis to wait a decade.
The move is significant for investors whose cash has been tied up in properties because they do not want to pay capital gains tax on a sale.
Another group affected by the 10-year rule is divorced couples. Many have held onto a property jointly, waiting for the decade period to expire so they can sell and avoid capital gains tax.
The move by the Nationals has created an excellent opportunity for investors and holiday homeowners who’ve been waiting for the expiration of their 10-year periods.
Many investors are seeking to sell the moment the new bright-line rule takes effect. In some areas, special auctions have been organised for July 2.
Below, we have listed some tips for you with the bright-line rule looming. We hope you find them helpful. In the meantime, if we can assist you with your property needs, please do not hesitate to contact us.
- Assess your:
- How long have you owned your property?
- What’s your estimated capital gain if you sold today?
- Is the new tax benefit of significant value to you?
- Get professional advice:
- Consult with a tax advisor or financial planner to understand your specific tax implications.
- Talk to a real estate agent about the current market conditions and your property’s potential value.
- Consider your options:
- Sell: Take this action if you wish to take full advantage of the new bright-line rule from July 1.
- Hold and Wait: Holding could be the best course of action if you are okay with the possible tax liability and think your property will keep appreciating.
- Explore Alternatives: Consider refinancing, restructuring your portfolio, or potentially converting a holiday home into a rental property.