Header Ad Module

Collapse

Announcement

Collapse
No announcement yet.

Tax on Sold property

Collapse
X
 
  • Filter
  • Time
  • Show
Clear All
new posts

  • Tax on Sold property

    Ok so I am pretty much a property virgin!
    I bought a house in March 2016 for my son and partner to live in with the aim being for him to buy it off us in a year or so. Cutting a long story short his job fell through and he moved to another city.
    So we sold the property in November 2016, around 9 months after we purchased it for more then we bought it for. We have never owned a 2nd property before and I have never had an accountant. Questions.
    1. Do I have to pay tax as I have sold it within 2 years? It was not my original intention, I was just trying to help a family member?
    2. If I do have to pay tax, I assume that I can offset my costs first?
    3. If I do have to pay tax, as the property is under both my wife and my names do we have to declare the profit 50 / 50 or can I put it all under her (she is a stay at home Mum so will be on a lower tax bracket)?

    Any guidance appreciated.

    Cheers

  • #2
    (1) yes, I believe even if your original intention was to hold it, given that you sold it under 2 years you will need to pay tax because of the recent changes. However, I'm not an accountant so best to wait for someone who is 100% certain.

    (2) I think you would have to pay 50/50 of it was a normal partnership purchase. Again, I'm no accountant.
    www.PropertyMinder.co.nz
    # Property Management
    # Ad Hoc Tenancy Services / Rental Inspections / Terminations and Notices

    Comment


    • #3
      If your son or his partner had bought the property, there would be no tax to pay, as they'd get the 'main home' exclusion. But because this was owned by yourself, and you didn't personally live in it, then yes it's caught by the Bright Line test. You're an innocent victim of the government's anti-property investor stance. Tell all your friends.

      You can offset the costs of sale, such as real estate fees and advertising, but it's initially unclear whether you'll be allowed to claim the costs of ownership - that is, rates/insurance/interest. The holding costs are an odd example in your case that they may be subject to the private limitation. If these costs are significant enough, get some tax advice. If they're small, just make a call yourself and it'll probably be fine.

      You'll need to declare the profit according to the proportion of ownership. Unless unequal ownership proportions were written into the legal documents when you bought it, that'll be 50:50.
      AAT Accounting Services - Property Specialist - [email protected]
      Fixed price fees and quick knowledgeable service for property investors & traders!

      Comment


      • #4
        Originally posted by Anthonyacat View Post
        You're an innocent victim of the government's anti-property investor stance. Tell all your friends.
        Victim?
        They made a profit that they never intended to make.
        As a result they will have to pay a % of that profit to the Govt - so effectively they made less profit that they didn't intend to make so are still ahead by lots - doesn't sound like a victim to me.
        Just saying!

        Comment


        • #5
          Doesn't it? It sounds there's a disadvantage in there to me.

          If you won a free top-class flight to Singapore, and the next day the airline changed their policy removing First and Business from their services so you had to book economy, wouldn't you be a bit annoyed? I would.

          I mean absolutely you're still better off than before. But you're worse off than you could be, because someone changed the rules. And in this case with the Bright Line test, they were changed to catch a problem you're not a part of.

          Bit of a glass half empty view I'll admit, but the black hat is required sometimes.
          AAT Accounting Services - Property Specialist - [email protected]
          Fixed price fees and quick knowledgeable service for property investors & traders!

          Comment


          • #6
            But the rule wasn't changed - it was already there when the purchased.
            They may not have expected it to affect them but then they didn't expect to sell at a profit either.
            They could have held the property for 2 years and then, due to their original intent, they wouldn't have been impacted.

            Still don't see the issue and how they are a VICTIM.

            Comment


            • #7
              If we're going to focus on the 'victim' word specifically, I can break it down a little, but it does feel a bit silly.

              a person harmed, injured, or killed as a result of a crime, accident, or other event or action.
              a person who has come to feel helpless and passive in the face of misfortune or ill-treatment.

              I do consider the government taking 10-33% of profit that in any other asset class would be non-taxable to be a financial harm as a result of an event or action. And the timing of it is certainly a misfortune.

              But perhaps my language was a little strong? It's clearly an unfortunate situation to be in, I'm sure you'd agree. What wording would you use?
              AAT Accounting Services - Property Specialist - [email protected]
              Fixed price fees and quick knowledgeable service for property investors & traders!

              Comment


              • #8
                Originally posted by Anthonyacat View Post
                What wording would you use?
                Bugger - but never mind I'm still ahead.

                Comment


                • #9
                  How about a "boo-boo"

                  Comment


                  • #10
                    We're in the same position. Bought a property for our son to purchase within a year. He became our tenant. He did nothing about the purchase (and it was apparent he never would) so we decided to sell. Made a profit, ready to pay the tax. I count that as a win, albeit not of the sort we'd imagined.

                    Comment

                    Working...
                    X