Property investors should be aware that they could face a tax bill even if they hold a property for more than two years or live in it themselves.

The bright-line test has now been reduced to two years, which means that investors who hold a property for at least that long are not automatically handed a tax bill for any gains they make on the property.

Inland Revenue has introduced a new tool to help determine if your property is taxable under any land taxing rules. This applies to:

• Properties bought with the intention of resale, regardless of holding period.
• Individuals with a history of buying and selling properties, who may be considered dealers.
• Properties affected by the bright-line rule.

Inland Revenue’s next focus is on the property sector, particularly frequent buyers and sellers. Properties bought with the intention of resale may be taxed, irrespective of the bright-line test.

An information-sharing agreement with Land Information New Zealand (LINZ) may also trigger Inland Revenue to reach out to individuals they have concerns about.

While there’s no set limit on the number of transactions or renovations before taxes apply, a pattern of three or more transactions is generally used to identify regular activity.

Our message is to stay informed and proceed with caution!