Is renting the property from our LAQC considered avoidance by the IRD?

Our Experts Answer:

Absolutely. This is a good example of the importance of getting good advice from professionals with experience in property. In this case, it is you that will have to face the harsh penalties imposed by IRD, not your adviser. There is no commercial reason as to why you would sell your home to an LAQC and then rent it back, other than to save tax. In NZ, you are not allowed to do anything for the primary purpose of saving tax. Saving tax must be a secondary or side effect. As to your old home, if you are renting that property to third parties (that is, not yourselves), then that property will be fine. One point often overlooked though is whether or not the old home even makes a good property investment in the first place, which should definitely be considered before deciding to keep the property as a rental or not.