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The better informed our clients are, the easier it is to make great decisions together.

 
 

Essential tax matters for Property Investors in 2020

 

Ring Fencing Rental Losses

  • Losses can’t be offset against other income sources, like salaries or business profits

  • Affects only residential investment property

  • Excess losses will be carried forward to offset future rental profit or Brightline Test profit

Brightline Test

  • Extended from two to five years on 29 March 2018

  • Taxing “Capital Gains” from the sale of any residential land sold within five years from purchase date

  • Exemptions are available if it’s your main home or inherited property

  • Restructuring ownership can trigger Brightline Test issues and reset Brightline date

Review Maintenance and Capital Expenditure Budget

  • Don’t assume all repairs expenditure is deductible outright

  • Some costs may need to be capitalised e.g. insulation costs

  • Chattels can be depreciated

  • Works undertaken immediately after the tenant left but before sale, are almost always non-deductible costs

  • Check with your accountant whether you can benefit from special Covid-19 write off rules

Mixed Use Property

  • Mixed use property = a property that is rented out night by night and also used privately

  • Ratio between private usage vs rented nights determines how much of the mixed use costs can be claimed

  • Mixed use rental losses are not subject to ring fencing rules, provided the gross rental income exceeds 2% of the property value

Intention to Sell

  • This is one of the taxing provisions that taxes the “Capital Gain” on the sale of the property

  • It is test at the time of purchase

  • Once established, the sale will always be taxed regardless of the years of ownership

  • Onus of proof is on you rather than Inland Revenue


We’re here to help

The partners and staff at Withers Tsang can help and support you through these challenging times.

Please call on us 09 376 8860 or email for assistance.

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