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Looming Troubles

Looming Troubles

Homeowners who do not live in their house for a significant period may be caught by new tax rules aimed at property investors.

By: NZ PROPERTY INVESTOR

1 July 2021

Chartered Accountants Australia and New Zealand (CAANZ) says homeowners may end up facing a large tax bill under the extension of the bright-line rule.

If a house is sold within that period the net gains will be added to the person’s income and taxed at the top rate.

It is a trap for homeowners, who CAANZ says should not assume the main home exclusion will automatically apply to them for the full 10 years – particularly if they are outside the safe harbour provision allowing them to be away for 12 months continuously.

People who could be caught out are those who are seconded by an employer to work away from home for more than a year, or those who take more than a year to build a new home and then sell within 10 years.

Falling outside the main home safe harbour will lead to paperwork and a potential tax bill. Those outside the safe harbour provision are urged to keep records of how long they are away and any improvements they make to the property while away which could be claimed against a property’s sale proceeds.

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