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What are your feelings around the 'Bright-line Test' extension? Unsure what it all means, F&P want to break it down for you...

You may need to pay tax on any profit you make on a property's value when you sell it.

 

Exclusions include:
- Your own home you live in.
- You receive the property via an estate distribution or relationship property agreement.

Otherwise if you now buy and then sell within 5 years you are caught.

 

From 29 March 2018, the time-frame of 2 years in the original Bright-line test has been extended to 5 years.
For standard purchases of residential properties, with no complicating factors such as association with a property developers or dealers, the following generally applies:
- For sale and purchase agreements entered before 1 October 2015: Bright-line test does not apply;
- For sale and purchase agreements entered after 1 October 2015 but before 29 March 2018: 2-year Bright-line test applies
- For sale and purchase agreements entered on or after 29 March 2018: 5-year Bright-line test applies.

 

Some interesting examples we have come across where people have been caught by surprise:
- Mum and Dad are part owners, but do not live in the house, that proportion of ownership could be liable for tax on any profit when you sell it.
- Change of ownership from individual names to a trust. Could trigger a new start date for the 'Bright-line Test', as effectively we now have new owner.

 

Always seek advise from your accountant or solicitor.

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Currently you can register your property as a ‘Holiday Home’ with Queenstown Lakes District Council (minimum stay of 3 nights; for up to 90 nights per year). But did you know, QLDC are proposing new rules for those wishing to rent their entire property for visitor accommodation. The proposed rules allow up to 28 days short-term rental a year with no more than three separate lets. It is anticipated that the proposed rules will have legal effect later this year.

 

Until the proposed rules have legal effect, you can continue to rent your property for ‘Visitor Accommodation’ in accordance with the current rules. Applications now will still focus on the current provisions until the proposed rules have legal effect. You can also apply for a Certificate of Compliance from the QLDC to provide a legal document confirming the lawfulness of an activity under the current district plan rules (maintaining your right to rent your property for ‘Visitor Accommodation’ up to 90 days a year).

 

Here is just one scenario provided by QLDC should you not register your property as a ‘Holiday Home’ & obtain Certificate of Compliance before the proposed rules take effect...

 

I own a second home at Jacks Point and only visit Queenstown every couple of months. How do I go about renting my property for visitor accommodation while I’m not using it?

 

Under the proposed rules you could continue to rent your property for up to 28 days per year consisting of no more than 3 lets. If you intend to exceed this, you’ll need a resource consent. However in Jacks Point, (as is the case with other lower intensity residential zones) exceeding the 28 day, 3 let threshold would trigger the need for a ‘non-complying’ resource consent which is likely to be difficult to obtain).
Learn more by clicking the link
HERE