Real estate, post level 4

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#2630881 6-Jan-2021 07:39

BlinkyBill:

There is an absolute defence to the brightline test (which came in in 2015, from memory), which is if the house is your primary residence then the test does not apply, and no capital gain is applicable.

If the house is not your primary residence, then the test applies.

So If I reno'ed the house I live in and sold it every year, I would not get nabbed as running an income generating business over time?

Sidestep

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#2630882 6-Jan-2021 07:47

tdgeek:

So If I reno'ed the house I live in and sold it every year, I would not get nabbed as running an income generating business over time?

Yes you would.

Check out Inland Revenue's take on that scenario.

BlinkyBill

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#2630883 6-Jan-2021 07:49

tdgeek:

BlinkyBill:

There is an absolute defence to the brightline test (which came in in 2015, from memory), which is if the house is your primary residence then the test does not apply, and no capital gain is applicable.

If the house is not your primary residence, then the test applies.

So If I reno'ed the house I live in and sold it every year, I would not get nabbed as running an income generating business over time?

Don’t take tax advice from me; but if you sold a house each year for seven years, say, I would expect IR to look in to it. If you can show that on each occasion that the sold house was your primary residence then you have an iron-clad defence to the brightline test. Whether IR and the courts will believe you I can’t say.

tdgeek

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#2630927 6-Jan-2021 08:01

Sidestep:

tdgeek:

So If I reno'ed the house I live in and sold it every year, I would not get nabbed as running an income generating business over time?

Yes you would.

Check out Inland Revenue's take on that scenario.

Yes, that was my feeling. Intent. As they can do with criminals, they can audit assets x years ago, and today, allow for base living costs, and the difference is undeclared income

BlinkyBill

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#2630993 6-Jan-2021 09:20

FUrther down on that same page referenced by Sidestep is a short discussion of ‘Main Home’ - “Your main home is generally excluded. Any gain you make on the sale of a property is not taxable ...”.

The page also notes that there is no formula, and you should get professional tax advice.

I think we might be discussing two things ... paying tax on a renovation to a main home (not applicable) and paying tax on a business model where you live-in whilst renovating (does apply). The trigger for IR would be the frequency of selling, and an investigation would take place. If you bought/renovated/sold your main home every 5 years I’d guess the former case, and annually I’d say that it would be hard to show it isn’t a business.

i don’t think it’s black-and-white yes or no.

wellygary

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#2630996 6-Jan-2021 09:27

tdgeek:

So If I reno'ed the house I live in and sold it every year, I would not get nabbed as running an income generating business over time?

As others have mentioned you would get nabbed,

Prior to the introduction of the brightline test, the rules on capital gains taxes were that things "acquired with the intention of selling" were liable to tax... the problem was that the process for IRD to prove "intent" were long and arduous....

That's why the "brightline" test was introduced as that only tests were non-family home and 2 ( now 5 years) since purchase....

BUT the original "buying with intent to sell" laws still exist.. and after a couple of house flips IRD would likely take a much closer look...

Also since the brightline test was introduced the data matching between LInz (property transactions) and IRD is now pretty extensive.... you would get noticed.

tdgeek

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#2631039 6-Jan-2021 09:30

BB and WG yes I agree. The word flip is in the wording also.

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GV27

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#2631250 6-Jan-2021 15:38

Re: Brightline:

The main home exclusion does not apply when you have a regular pattern of either buying and selling or building and selling your main home.

From the link above.

E: Also editing this to say that IRD picks a few things each year to really focus on and I'm not surprised to see property transactions getting the magnifying glass treatment given supposedly poor compliance with the Bright Line.

elpenguino

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#2631271 6-Jan-2021 16:13

GV27:

Re: Brightline:

The main home exclusion does not apply when you have a regular pattern of either buying and selling or building and selling your main home.

From the link above.

E: Also editing this to say that IRD picks a few things each year to really focus on and I'm not surprised to see property transactions getting the magnifying glass treatment given supposedly poor compliance with the Bright Line.

Also, IRD goes where their time will be most rewarded. Now that house prices are climbing fast, some speculators will be pocketing large windfalls.

The penalties will be huge !!

Most of the posters in this thread are just like chimpanzees on MDMA, full of feelings of bonhomie, joy, and optimism. Fred99 8/4/21

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#2639472 21-Jan-2021 11:42

i think rich got richer in pandemic

https://www.stuff.co.nz/life-style/homed/real-estate/124010975/queenstown-house-marketed-over-8-million-sells-sight-unseen-to-australian

tdgeek

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#2639484 21-Jan-2021 12:17

Batman:

i think rich got richer in pandemic

https://www.stuff.co.nz/life-style/homed/real-estate/124010975/queenstown-house-marketed-over-8-million-sells-sight-unseen-to-australian

Did they? So those that own a home that aren't rich got nothing? Thats odd. Pointless post and clickbait article

Batman

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#2639504 21-Jan-2021 13:05

tdgeek:

Batman:

i think rich got richer in pandemic

https://www.stuff.co.nz/life-style/homed/real-estate/124010975/queenstown-house-marketed-over-8-million-sells-sight-unseen-to-australian

Did they?

lmgtfy

https://www.google.com/search?q=covid+rich+get+richer

tdgeek

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#2639549 21-Jan-2021 13:11

Batman:

lmgtfy

https://www.google.com/search?q=covid+rich+get+richer

Lol, you're getting sucked in. Anyone that has ownership in a house got richer. The % of home ownership that are rich is a small number.

The correct title is homeowners are getting richer, but thats boring

wellygary

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#2639563 21-Jan-2021 13:28

Batman:

i think rich got richer in pandemic

https://www.stuff.co.nz/life-style/homed/real-estate/124010975/queenstown-house-marketed-over-8-million-sells-sight-unseen-to-australian

Not just in pandemics, some would way that the financial assets of the wealthy got protected in pretty in much all recent major market dislocations...

....it was originally called the Greenspan put...

The problem is if you simply let markets totally fail , the impact on others (wage workers and the middle class) is usually disproportionately worse...

martyyn

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#2643793 28-Jan-2021 18:59

martyyn:
martyyn:

Today another one has been staged to within an inch of its life and put on the market for $485k.

Just had a closer look at this one.

It's actually the undecorated one which sold in July for $355k and not Sept for $375k (my mistake)

It's been painted white inside, new grey carpets and curtains with a new kitchen (the same as my MIL which cost $5k to do) and is on the market four months later for $485k

$135k in four months could be some nice coin.

In case anyone is interested the same price has been released.

Sold in July for $355k, interior painted, carpeted, curtains, $5k Bunnings kitchen then sold in December for $490k.

Madness.

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