PHOTO: Photo: RNZ / Dom Thomas
Homeowners who do not live in their house for a significant period may be caught by new tax rules aimed at property investors and may end up facing a large tax bill, according to the national accountant’s body.
The government has tightened the bright-line property rule, which will hit people selling houses, other than their main home, within 10 years of purchasing.
The net gains made on the sale of the house within that period is added to the person’s income and taxed at their top rate.
Chartered Accountants Australia and New Zealand (CAANZ) said the fine print of the law contained traps for owners with changing circumstances.
CAANZ New Zealand tax leader John Cuthbertson said people who were away from their main home for considerable periods might be caught by the bright-line test and would have to pay tax if they sold within the 10-year period.
“Homeowners should not assume that the main home exclusion will automatically apply to them for the full period that the property is owned.”
A ‘safe harbour’ provision allowed homeowners to be away from their main home for a continuous period up to 365 days (12 months), which Cuthbertson said was too short to protect main homeowners in some circumstances.
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