Property Tax Tip: The 10-Year Rule for Real Estate

Property tax rules NZ

For this property tax tip we thought it might be handy to summarise the 10 year rule. There are three classes of people involved in land type businesses for income tax purposes. They are developers, dealers in land and builders. The first two are not generally involved in building. If they buy an investment property and sit on it for at least 10 years, they can sell the property without incurring tax on the gain.

A builder is defined as someone who is in the business of erecting buildings. If a builder builds an investment property, the 10 years runs from the date of completion. If a builder makes any reasonably significant improvements to any property owned by an associated entity then 10 years has to run from the date of completion of those improvements before it can be sold without incurring income tax.

This rule probably won’t change under the new government but watch for other tax changes that may impact on property transactions. We will keep you posted as any new rules become tax law.