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If you frequently buy and sell property, you may want to keep a close eye on Inland Revenue’s review of some property tax rules that was announced in September 2019. One area being targeted is the use of the ‘main home exemption’.

Under current rules, you may be exempt from paying tax on a property sale if the property is your main home. You cannot rely, however, on the ‘main home exemption’ if:

  • You have already claimed the exemption twice within the previous two years, or
  • You engage in a regular pattern of buying and selling residential properties.

The IRD is considering tightening the exemption rules. It proposes reviewing property transactions under your own name together with transactions under the name of someone living with you or an entity associated with you, such as a family trust. If there appears to be a pattern when all those transactions are looked at together, you may be liable to pay tax.

Further limits on the exemptions that apply to property used as residential and business premises are also contemplated. The IRD is likely to announce a decision on these changes later this year, with law changes being made in 2020. The full details on the proposed rule changes can be found here.

DISCLAIMER: All the information published in Property Speaking is true and accurate to the best of the authors’ knowledge. It should not be a substitute for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this article. Views expressed are those of individual authors, and do not necessarily reflect the view of this firm. Articles appearing in Property Speaking may be reproduced with prior approval from the editor and credit given to the source. Copyright, NZ LAW Limited, 2019. Editor: Adrienne Olsen. E-mail: Ph: 029 286 3650 or 04 496 5513.

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