Hawke's Bay Property Investors' Association

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Home owners can pay property tax as well

An issues paper on the Bright-line test for sales of residential property, released yesterday confirms that some homeowners will have a Bright Line test applied against them.

"The new Bright Line law is aimed at anyone who trades property for profit" said Andrew King, Executive Officer of the NZ Property Investors’ Federation (NZPIF), “so habitual renovators will have the new Bright Line test applied against them, as well as traders and speculators who never live in the property.”

Anyone who frequently buys a home and does it up while living in it then sells it for a profit is really running a trading business. These people should be taxed under existing law, so the Bright Line test simply makes this clear. It states that if a home renovator buys and sells their home more than twice in a two year period, they will be deemed a trader and tax will apply on any profit they make.

"The Bright Line law is not aimed at people who buy a home to live in it long term or people who buy a property to provide tenants with a home. People need to realise that there is a clear difference between property traders or speculators and property investors" says King.

"A property investor provides a home for a tenant. A property trader or speculator buys and sells property. We need more rental properties for tenants in places like Auckland, so we don't want to make it harder to provide them.”


Tags: capital gains tax