Posted by Quinovic Viaduct on
The winds of change are blowing: 1st October is coming and with it will come the capital gains tax on rental properties. So, should you buy now or later? It all depends on your long-term plan of ownership of your investment property.
Remember the tax will only apply if you sell the Investment Property within two years of ownership the tax is on the profit of the sale. Exempt are the following: family homes, inherited, or the home is needing to be sold due to a relationship split. This change only really clears up a problem for people who were trading property and not declaring the tax gained on the sale.
The old law said that if you bought a property with the intention of selling it for gain that gain is taxable. The problem was the intention it was never clear. Now it is clearer if you buy and sell within the two years the tax will apply for the profit of the sale.
The interesting thing is what happens if there is a loss on the Sale? Will you be able to claim this against your taxes? The other change is for overseas buyers whom will require an NZ Bank account and tax number Should you buy now or later? It all depends on a number of things the reason why you buying, how long you wish to hold and will the numbers add up giving you a return on the investment.
Property is a cycle and as long as you understand the cycle and you know where you are in the cycle when you buy you can either buy and hold, buy to sell but to improve and hold or sell. What is important just like every other decision you make get a team of experts around you to help you make the right decision for you.
We like to work with investors before they buy so we can help with advice on rental returns, and where to buy and what will work for both the investor and us. Just like all good sports teams you need to know whom to go to for the job to be done.
David Graham is Principal of Quinovic Viaduct, Auckland property management specialists. Find out how to list your apartment with them.