Capital gains tax on rentals?

Our Experts Answer:

There is currently no capital gains tax in NZ, although voters should be aware it is labour policy to introduce one. Despite this, the income tax act contains a variety of taxing provisions that can tax gains where property is purchased with an intent to onsell or where the taxpayer is in the business of dealing in land, developing land, or erecting buildings. Gains from subdividing land can also be taxable in certain circumstances. The taxing provisions extend to tax gains derived by people or entities associated with people engaged in taxable land activities also. That said, where a property investor has acquired a property for rental purpose free of any intention to onsell it and free of any association to a developer, dealer or builder, gains eventually realised on sale are tax free. It’s worth noting though that if gains are made historical claims for depreciation will still be clawed back and taxed as depreciation recoveries.