Updates & Articles

Residential Property - the bright-line test and tax

Property investors come in all shapes and sizes, from large scale professional operations and developers to so-called ‘Mum and Dad’ investors who wanted to save for their retirement with something they could feel was literally safe as houses.

Changes to tax rules for investment properties have shocked investors. More are coming, as Inland Revenue have put further changes out for consultation.

So far, for properties purchased on or after 27 March 2021:

  • the bright-line test is now extended from 5 to 10 years, except for new builds, where the test period is still 5 years
  • the current bright-line test exemption for the main home changes, making them subject to a ‘change of use’ rule

From 1 October 2021, property owners will not be able to claim mortgage interest deductions on residential investment property acquired after 27 March 2021, and mortgage interest deductions for residential investment property acquired earlier will be phased out over the next four years.

Inland Revenue are now issuing bright-line campaign letters. As soon as they are aware of a potential bright-line transaction, usually within a month of the transaction, they’ll get in touch to give an early heads-up of any possible tax obligations.

The Government is considering further changes, including for example, the rules around what constitutes a ‘new build’ and how the interest deductibility rules should work.

We’ll keep you informed, but if you’re planning to buy or sell property, please contact us so we can look at the tax implications with you.

We can sort out any tax issues

Ultimately, the Inland Revenue calculates your tax based on the information they have about you and your business. If they have the wrong information, you may be paying too much tax or too little tax.

We can look at your surprise tax bill and help you work out what’s gone wrong. We can also deal with Inland Revenue on your behalf to give them the right information and ensure you’re paying exactly what’s required and no more. We’ll work with Inland Revenue to get your refund sorted out or to come up with an affordable payment plan.

DOWNLOAD THE GUIDE ON RESIDENTIAL PROPERTY - THE BRIGHT-LINE TEST AND TAX

The Maritime Museum Foundation has enjoyed a significant long term relationship with the team at Lynch & Associates. They continue to provide our board with outstanding professional service and sage advice. I would unreservedly recommend their accounting, audit and advisory services.”

Eric Mahoney, Chairman, Maritime Museum Foundation

Lynch & Associates have been our accountants since 2018. Through that time their friendly and approachable team have guided us and made good, clear recommendations for our theatre company for children. Their support and advice continue to help create a stronger, more sustainable charitable organisation. 

Tim Bray, QSM, Trustee and Artistic Director, The Operating Theatre Trust

It has been a pleasure working with Errol Burn and the team at Lynch and Associates, their insight, intelligence and in-depth knowledge of the social impact sector has allowed the Sir John Kirwan Foundation to flourish and grow.  Fully supporting the Foundation in all of its financial needs, Lynch and Associates have never failed to deliver, always providing calm, thoughtful advice together with encouraging us to consider every aspect, to ensure maximum benefit.

Nikki Flexman, Head of Growth, Sir John Kirwan Foundation

We have used Lynch and Associates services for over 15 years and have always found them to be a very friendly, helpful and professional team. They also really care about us and our business, as they went out of their way to assist us during difficult times. We have also used their professional business services that proved invaluable in helping us to get through a rough patch and refocus our efforts. Their approach to business services was understanding of our situation but well blended with firm encouragement to address issues and make strides towards improvement. We highly recommend them for both their accounting and professional business services.

Darryn Smith, Director, Multicolour Screen Printers Limited

A huge “Thank You” and shout out to the team at Lynch & Associates for all the consulting and accounting services they have done for my wife and I over the past 12 years. The team have work diligently on both trusts and a number of companies for us over this time and long may this continue. It is so great to engage with a professional proactive team that results in no sudden surprises at the end of the tax period. We look forward to the catching up soon and hearing what is new and how else we can move forward faster financially.

John and Shelley Bishop 

We believe in putting people first and sharing our knowledge and experience to help our clients achieve success in business and life. If you think we could be a good fit for your accounting needs, please get in touch.

Contact Us

Phone +64 9 366 6005
Email: admin@laaca.co.nz

Location

B:HIVE, Smales Farm
74 Taharoto Road, Takapuna
Auckland 0622
New Zealand

© Lynch & Associates Chartered Accountants

Website by Designer Digital