What Tax do I have to pay if I’m Selling a Property for Profit?

Posted by Bizink on Dec 7, 2010 5:34:42 AM

If you sell your family home and are lucky enough to make a good profit to help with the purchase of your next family home – don’t worry about it – if it’s all straight up and uncomplicated and the time factor is reasonable and you are doing what you say you are doing the IRD won’t be interested as the profits from the sale of a family home are generally not taxable. You will need to declare it on an IR3 – as an individual tax return and tell the IRD what you are doing and how all the figures are worked out.

On the other hand, if you are in the business of buying and selling property, even in a small way, you need to pay tax on any profits made. As an individual or partners (married, de facto, civil union) the IR3 is the way to go and you will need to show clearly how you worked out your profit (income less expenses) and that figure is added to your other income to calculate your tax.

If you are in this business, you will probably exceed the provisional tax level of $2,500 – This tax is not in addition but rather an installment based system of paying tax against your expected tax at year’s end.

If there are two or more of you in your group or partnership who are buying or selling as a business you need to file an IR7 and the group will have to have an IRD number (by completing an IR596). This means you only have to send in one set of accounts.

If this group or you as an individual are making over $,60,000 as an annual turnover, then you also need to register for GST.

Get it done as soon as you can, because the IRD is focusing on property as one of its areas of enforcement.

Topics: Firm News, GST, investment property, rental property, xero, accounting, Blog, IRD, profit, property sale, property tax, tax, changes


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