01 Aug Loss ring fencing and buying/selling property
Loss ring fencing and buying/selling property
With very little fanfare the “Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Bill” was passed into law at the end of June. While this law sounds sufficiently boring, if you have any involvement with residential rental property, it will be of interest to you – it introduces loss ring-fencing on residential rental properties. This means that if you own a residential rental property that runs at a loss, you can no longer offset that loss against other forms of income, only residential rental income. Like any good tax law, there are a few complications, so for our tax clients who have rental properties, we will be in touch in due course to talk through how this will affect you. If you want to discuss your circumstances a little sooner, feel free to contact us.
Something that we didn’t expect to see: Planning on buying or selling a family home? You will now be required to supply your IRD number as part of the sale and purchase process. This is intended to increase compliance with the bright line rules (the rule that says you have to pay tax if you sell a residential property within 5 years of buying it, except for your family home). This means that if your family home is owned by a family trust that does not have an IRD number, when you sell you will need one.
