Advice Sought on Subdivision Tax implications

[robert786]

I guess it depends on when the gain would be taxable. If it only when it is realised on sale, then buy and hold becomes even more attractive.

As for buildings not been depreciable - I don't think that would fly with the commercial property owners who provide the office space for the country, and distinguishing between commercial and residential would quickly become a blurred distinction.

The argument that tax incentives are effectively the government paying investors to provide a social service (housing) that the the government is unable or unwilling to provide itself holds true. If RE becomes massively unattractive as an investment, then rents will skyrocket and the gvt will be left to pick up the bill and/or the people on the streets.

Having said that, only current investors would be disadvantaged - once any rule change is in place, the numbers will still be the important thing - can the rent for this property cover its expenses. Whether that is before or after tax or before or after any contribution from the investor (-ve gearing) is a decision for individual investors to make. What changes is the way the numbers are calculated, and the result may be increased rents to make property stack up as an investment.

Do Aus/UK/US charge CGT - if so, what effect does it have?

Happy taxing

cube

hello, i am planning to subdivide my property and wanted to gift new dwelling to my mother ,does this attract tax?

[murraythompson]

Hi there

This one may need you go to see an accountant to get it 100% correct as there are a few fish-hooks. I can give a few general taxes that might apply, but with everything - it depends. Get some advice BEFORE you start the subdivision.

Gifting - There used to be Gift Duty in New Zealand. This is now been removed. However, there may be issues with the recipient (your mother) or you with any benefits from Work and Income or a rest home subsidy.

When did you purchase the property? The date you gift it is a sale of the land, so the Bright-Line Test may apply. If you sell it before 2 or 5 years, then any gains on the value of the property might be taxable. See the IRD website here: https://www.ird.govt.nz/property/brightline-qa.html

What was the purpose of doing the subdivision? Did you purchase the property with the intention of making a profit? Are you a property developer? Any of these can also make a gain on the 'sale' taxable.

Hope that has given you an overview of the potential issues!

Murray
Rental Coach

https://www.rentalcoach.co.nz

[Rosco]

hello, i am planning to subdivide my property and wanted to gift new dwelling to my mother ,does this attract tax?

Hi Robert, you need to get expert advice from a property accountant.

Starting point is that a sale from a subdivision is taxable. You also need to consider if GST is payable as well.

But there are a lot of exemptions, so you might be able to get an exemption, or change around how you are doing it slightly so that an exemption applies.

Ross

[Nick G]

Also consider estate planning, but yes, agree 100% with Ross, who has a great reputation as a property accountant. It'll be the cheapest consultation fee you ever pay.