Ring-fencing rules
If your rental makes a loss, you can’t offset that loss against other income.
Don’t worry — you won’t lose the losses. They can be carried forward and used in future years when your portfolio turns a profit.
Brightline Test Rules Reminders
From 1 July 2024, the Brightline period has been reduced from 10 years to 2 years.
What matters is the end date i.e. the sale date when a binding agreement is entered into, not settlement date.
The Brightline test applies to property in New Zealand and overseas.
Profits from Brightline sales are taxed at your relevant tax rate.
The Brightline usually starts on the registration date unless you're buying off the plans.
There are exceptions and exclusions for the Brightline test, such as the main home exclusion or sales to associated parties.
Brightline is complex and you should get expert advice before considering a sale of your property.
The Intention Test
This test looks at your intentions at the time of purchase. If your intention is to sell at some point for a gain, then that gain may be taxable.
Be careful taking tax advice from parties who are not property experts. Seek expert advice from a person who understand property.
How to choose an accountant for your rental portfolio
Finding the right accountant is more than just checking credentials — it’s about building a relationship with someone who understands your goals.
It is a business relationship. Choose someone who you get along with and provides clear communication and who you feel comfortable talking to.
Book a meeting and talk through your situation. A great accountant will answer your questions in a way you can understand.
Look for an Accountant who understands rental properties. Ideally, you want to find an Accountant who own’s rental properties themselves and is immersed in the investment property industry and associations such as New Zealand Property Investors Association (NZPIF) and your local Property Investors Association.
If you need help with your tax return or have a question about accounting or property tax, book a free consultation with Shortland Chartered Accountants here.
This article is for general information only. You should always seek personalised, professional advice before acting on any of the material.
