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.