Important Tax Rules and/or Benefits When Purchasing a New Build as a Home or Investment.
If you're looking to grow your wealth and secure your financial future in New Zealand, purchasing a new home over existing can be an excellent option. Investing in real estate has long been a popular choice for many Kiwis due to its potential for generating substantial returns and providing numerous benefits. So, what are the tax rules and/or benefits of purchasing a new build? We explore this below:
Whether you’re purchasing a home to live in or looking for an investment property, it’s extremely important to understand the tax rules and/or benefits of buying new. Please note that Barrett Homes is not a tax professional or financial advisor and recommend consulting with a qualified professional for specific guidance tailored to your situation.
If you are renting out your new home or a part of your home, you may be eligible to claim certain expenses as deductions on your tax return that you may not get with existing homes. These deductions can help reduce your taxable rental income and ultimately lower your overall tax liability. These can include your Mortgage Interest, Rates and Insurance, Repairs and Maintenance and many more. It's worth noting that the rules and regulations regarding rental property deductions in New Zealand may change over time, so it's essential to stay updated with the latest information from the IRD or consult a tax professional to ensure compliance with the current tax laws.
There are several grants and subsidies available to support homebuyers, including those purchasing new build homes. To encourage healthier homes and the purchase of new rather than existing, most grants will provide higher financial assistance (depending on your own financial situation). From the First Home Grant, KiwiSaver HomeStart Grant and Welcome Home Loan, there are many grants and subsidies to investigate. To get accurate and up-to-date information on your eligibility and the specific requirements for these grants, you should visit the official websites of government agencies like Kāinga Ora or speak with a mortgage advisor or a housing specialist in New Zealand.
The Bright-line tax rules are designed to tax the gains on the sale of residential property. The rules aim to discourage property speculation and promote housing affordability. If you sell a residential property within the Bright-line period, any gain made from the sale may be subject to taxation. The Bright-line rule looks at when the property was acquired; on or after 27 March 2021 and sold within 5 years for qualifying newbuilds or within 10 years for all other properties – giving new builds a 5-yearadvantage over existing. It is important to know that if the property being sold is the owner's main home, it may be eligible for an exclusion from the Bright-line tax. However, if you frequently buy and sell properties, even if one of them is your main home, you may still be subject to the tax rules.
Whether you’re purchasing a home to live in or looking for an investment property, it’s extremely important to understand the tax rules and/or benefits of buying new. Please note that Barrett Homes is not a tax professional or financial advisor and recommend consulting with a qualified professional for specific guidance tailored to your situation.
