There will shortly be a significant change to our income tax legislation regarding the taxing of property that we wanted to highlight to you.
Change to the taxing of property transactions
The main gist of this change is that the two year rule for property is soon to become the five year rule
The Government has confirmed that it will be extending the bright-line test on residential property from two years to five years. This means that you may well be taxed on any gain on selling a property, other than your main home, if you sell it within five years of purchase.
The operation of the bright-line test will continue exactly as it does currently, with the only change being to extend the relevant period to five years. For more information on the bright-line test, please see here for a Deloitte Tax Alert article when the test was first introduced. The exemptions to the rule for your main dwelling etc. still apply.
This change will come into force on the date the Taxation (Annual Rates for 2017-18, Employment and Investment Income, and Remedial Matters) Bill receives Royal Assent. While it is unclear when exactly this date will be, we expect the change to come into effect before 31 March 2018.
If you would like to discuss how this change will affect you please contact us.
Deloitte Private Wellington