If its not the family home then it would be subject to CGT. Non performing assets like this and land banks ought to be dealt to because they sit idle adding nothing to anyone for such a long time. Thats not fair
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Is my understanding correct then, you are suggesting that if I:
1) Buy a property in Auckland to use as my bach and don't rent it out it is all good and regardless of any gain I pay no tax
2) Buy a property in Auckland to use as my bach and rent it out occasionally and cover rates, insurance and some maintenance, I now pay tax on any gain
3) Buy a property in Auckland and run a business as a residential landlord renting that property I immediately turn into a 3 headed monster that has to be taxed within an inch of my life, not to mention a continual raft of legislation around running that business
You would be liable for CGT as its not the family home
you would be liable for income tax on any rental profit and CGT
you would be liable for income tax on any rental profit and CGT on the rental property. And if you claim home office expense liable for CGT on your family home
Death duties are easily avoided by holding assets in a trust.
Sure the value of the owner’s use of personally owned assets can be more difficult to assess than if the owner actually charges a third party for the use of those assets.
The owner of a Bach or second home already enjoys the benefit of its use tax-free. After all the owner’s imputed rent does not have to be paid for out of taxed income. So baches already have a tax advantage to that effect. However the Labour government did not extend the primary residence CGT Exemption protection to other owner-occupied real estate.
Unless there is other major more general change to the NZ tax and investment environment, We will have to agree to disagree on the justification (or lack of it) of excluding the primary residence not only from income tax on the net annual benefit of owning the equity in the home, but also excluding it from a CGT. In my opinion This double tax efficiency would be a major reason why household wealth would be further diverted from other investments and KiwiSaver.
it sounds like your equity has been used inefficiently. Many others would be in your position too I guess. A CGT could deter such inefficiency and hopefully it would benefit the country and the owners of equity too. Plus who knows maybe land would become more affordable for those wanting a principal home to live in.