NZ residential property rental market 2015
What were the major changes?
With effect from 1st October 2015, a new test was introduced referred to as ‘The Bright Line Test’. This effectively states that any gain resulting from the sale of residential land & property (overseas property included) within 2 years of owning it, will become subject to income tax. There are exemptions for:
a) Your main home (as long as you don’t conduct more than 2 sales within the 2 years
b) Transfer of property following death.
c) Transfer of property resulting from a relationship breakdown. Residential land is defined as land with or capable of having a dwelling on it. The 2 year period will run from the date of acquisition to the date of disposal. This could be date of unconditional agreement to sell or for the buyer the date of registration of title. If a loss is incurred, then that loss will be recognised for tax purposes but only against a taxable charge from the sale of another property.
A new withholding tax will be introduced from 1st July 2016 on sales of NZ residential property by people who live overseas and go on to sell their property within 2 years of purchase as covered under the ‘Brightline Test’. It will apply to all non NZ citizens and residence visa holders. NZ trusts and companies may also be considered if they have significant offshore interests. The obligation to deduct the tax will rest with the conveyance agent. Some exemptions will apply. The rate proposed will be the lower of 33% x sellers gain or 10% of total purchase price.
Insulation and Smoke alarms
All tenanted residential properties must have smoke alarms installed by 1st July 2016 and insulation fitted under floors and ceiling cavities by 1st July 2019. There are exemptions to this in cases where the space cavity does not allow enough room for such and is impractical.
Non NZ residents will need a NZ bank account before they can get an IRD number.
NZ IRD number is required for all property purchases.
A new 10 day tenancy process to enable re tenanting of properties where a tenant abandons a property with no intentions of returning. Current process can take up to 6 weeks.