Tax Rules and Benefits with New Build Properties
SM Property

May 31, 2023

When it comes to securing your financial future in NZ, purchasing a new build home or investment can offer significant advantages. Understanding the tax rules and benefits associated with new builds is crucial to maximize your returns. Let’s explore the important tax considerations when buying a new build property.

Tax Deductions for Rental Properties

If you’re planning to rent out your new build property, you may be eligible to claim expenses as deductions on your tax return. Unlike existing homes, new build properties often come with additional deductions, such as mortgage interest, rates and insurance, repairs, and maintenance. These deductions can help reduce your taxable rental income and lower your overall tax.

Grants and Subsidies

There’s government grants available to support homebuyers in NZ. Plus, there’s additional incentives for those purchasing new build properties! Grants such as the First Home Grant and schemes such as the KO First Home Partner Scheme provide financial assistance to encourage the purchase of new builds. To determine your eligibility and learn about specific requirements, visit the Kāinga Ora website or consult with a mortgage broker.

Bright-Line Tax Rules

The Bright-line tax rules aim to tax gains on the sale of residential properties, promoting housing affordability. For new build properties, the Bright-line period is five years, providing a five-year advantage over existing properties, which have a ten-year period. If you sell a property within the Bright-line period and make a gain, it may be subject to taxation. However, there are exclusions for properties designated as the owner’s main home. Understanding these rules is crucial, especially if you frequently buy and sell properties.

When purchasing a new build property, it’s important to be aware of the tax rules and benefits. Understanding these aspects can help you make informed decisions and maximize your financial returns. Make sure to chat to a mortgage or financial advisor to discuss your options. If you need a good recommendation, chat to the SM Property team and we’ll guide you in the right direction. If you’re looking to buy a townhouse, the SM Property team can guide you through the whole process and find the right home or investment for you!

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