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Don't Let The Good Life Fence You In

Tax, conveyancing and ownership structures need to be checked before you don the gumboots, writes property law specialist Annabel Sheppard.

By: Annabel Sheppard

1 August 2022

The land of milk and honey, pastures green and the Kiwi drive to live the good life is alive and well. While many are opting out of life in our larger cities for the regions, some are looking to lifestyle blocks as a means of “having it all”.

While real estate agents typically pitch the option as an idyllic opportunity to get away from it all to live your best life, perhaps even an opportunity to set up a small boutique business with tax incentives, not all is as straightforward as it seems.

It’s worth signposting several often overlooked considerations surrounding tax, conveyancing, and ownership structures before you take the leap of faith and jump in boots and all.

Different rules apply to different locations, so it is important that before you buy a property you complete due diligence. This includes checking what rules apply to the particular area you are looking to buy in, to help ensure you can use the land for your intended purpose. Even if you comply with the relevant plan rules you need to make sure you also check there are no restrictions on the property title that may impact what you want to do with it after purchase, immediately or further down the track.

‘The thing about living on a lifestyle block is that time doesn’t stand still’

Tax And GST

It is always important to discuss these issues with your accountant or tax adviser. If you hold a property for less than 10 years and it isn’t your primary home, it is likely you may have to pay capital gains tax through the bright-line rules. GST is always a complicated area and often with a lifestyle block you will need to decide if you should be GST registered. You need to clarify this and have the right information before you proceed with any purchase.

Often people are reluctant to seek advice from an accountant and a lawyer, but having all the information upfront is the very best way to avoid nasty surprises that can and do pop up as a result of taking shortcuts.

As well as getting tax advice it is important to decide what is the best ownership structure for your lifestyle block. There are differences between forming a partnership, company, trust or keeping it simple and just buying in your own name.

Keeping The Dream

The thing about living on a lifestyle block is that time doesn’t stand still. Family and personal circumstances change; that boutique business isn’t always guaranteed to be financially sustainable; and things can become too much.

If there is a desire to retain some element of the dream, then subdividing the block is often the best option.

Talk to a surveyor when you are making the decision to subdivide. Rules around subdivision, generally, can change over time as can rules relating to the size of your property and those that apply in the particular area your property is located. Do not make the mistake of assuming that because the property next door has been subdivided it automatically means you can. Seek advice before you commit.

Due diligence can appear “unnecessary” but it is the safest way to future-proof the dream. Do not make the mistake of short-changing the process.

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