Is tax payable on the sale of a property?

Question from gregg updated on 9th July 2008:

I have 2 rental properties. One that has been my home for 8 years and now rented for 7 years. And one that has been bought 2 years ago to move into but rented until we can afford to.We currently rent. How does the taxation law apply to me on each property in regards to capital gains tax if I sold now or should I wait.If I occupy each house for a time does it become my family home, in regards taxation on capital gains? Is it wise to wait for any changes that have been talked about by reserve bank, or should I act now?

Our expert responded:

Whether or not tax is payable on the sale of a property all comes down to your intention at the time of purchase. If your intention at the time of purchase was to own the property long term (and it is best if this is documented with your lawyer or accountant), then you won't need to pay tax on any gain, even if you sell the property less than 10 years after you bought it. The only proviso on this is to make sure that your actions back your words. In other words, don't say it's a long term buy and hold, then do up the property and put it on the market six months after you bought it. Unless something has happened such as you've been made redundant or your relationship has broken up and so you are selling for good reasons. If your intention at the time of purchase is to on-sell the property, it won't matter when you sell the property, you will have to pay tax on any gain you make.

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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