Legislative Changes Affecting Investment Property
The change in Government last year has seen some election promises start to come to fruition. While we didn’t see the roll back of foreign ownership restrictions on properties over $2m, we have seen an amendment to the brightline test, the ability of to now invest in build to rent projects, and a requirement for GST to be collected on all short term accommodation:
Bright-line Test down to 2 Years
Sales in recent months, especially in the lifestyle investment sector, have also been significantly impacted by the pending roll back of the Brightline Test from 10 years to 2 years. This is one election promise that has been kept and will take effect from July 1. What it means is that from July 1st, buyers will only be obliged to pay tax on the capital gain of their property if they sell within 2 years. This rule change supersedes the 10 year and 5 year rules that have been in place. As such, any properties sold after July 1st, 2024 will therefore only have to pay tax on any profit made on the sale if they have owner the property for less than 2 years. Put simply, properties purchased before July 2022 will no longer be subject to the Brightline test. For further details visit the IRD website via the link below and as always, if you are considering selling, you should get legal and tax advice before selling your property to make sure you are aware of your Brightline obligations.:
Changes to Bright-line Property Rules
Foreign Ownership for Build to Rent
Unfortunately, the election promise of rolling back foreign ownership restrictions on properties over $2m did not eventuate, however, those properties in major complexes that are rated Commercial remain exempt. A change that has been made however, has been legislation that makes it easier for overseas investors to invest in Build to Rent developments in New Zealand. The change to the Overseas Investment Act is intended to provide a more streamlined pathway that allows investors to purchase land with the intention of building a new Build to Rent development – or purchasing an existing one. For more details see link below:
Build to Rent – Open for Foreign Investment
GST for AirBnb
Another piece of legislation that came into force on April 1 is that anyone who provides short term accommodation through an online marketplace such as AirBnb will now have GST collected on all services provided through those various platforms. There are some complexities around this and we do suggest, if you are not already registered for GST that you speak with your accountant / financial advisor. In the interim you can view further details via the link below:
