Am I subject to CGT if purchasing 2 properties per year?

Question from Chester Rooney updated on 20th May 2008:

Re: Section CB 14 of the Income Tax Act 2004
The way I understand this Section is that it's essentially excusing everyone from paying CGT on the property they reside in, except if one has "engaged in a regular pattern" of buying and selling the property they reside in.
So my question is, how often can one legitimately buy and sell the property they reside in before they have "engaged in a regular pattern" and therefore subject to income tax (aka CGT)?
Is it one or two or more properties a year?

Our expert responded:

Your understanding of the legislation is correct. The $64000 question though is what constitutes 'regular'? In order to answer that question, you would need to consider what's reasonable. Statistics tell us that the average length of time someone owns a home is seven years. By definition, being an average means that there are people who own their home less than seven years, and those that own it more than seven years. On that basis, it would be reasonable to assume that 'one or two properties a year' would be considered a regular pattern and therefore subject to income tax on any capital gains made. It could even be considered that someone who bought and sold their home every three years could be considered a regular pattern as well, especially if they were doing a lot of work to the property to increase its value. Whatever you do, make sure your intention in relation to the property is well documented at the time of purchase.

Kenina Court is a director of Acorn Solutions Limited, an accounting firm dedicated to working with clients to help them create wealth. She is an avid property investor, entrepreneur and seminar presenter on asset protection and wealth strategies.


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