Your reasons for buying your property are important
When deciding whether or not you should pay tax on the profit from the sale of a property, we look at your intention when you bought it.
A good test is to ask yourself "What were my reasons for buying this property?"
| If you ... | then it is ... |
|---|---|
| intended to sell the property when you bought it | likely your profits are taxable. |
| bought the property intending to make a profit | likely your profits are taxable. |
| bought the property as your family home | unlikely your profits are taxable. |
To work out your intention we listen to what you tell us and look at your actions. We might look at statements you made to a bank manager or advisor when you bought the property, and at any plans made or discussed at the time.
Everyone's circumstances are different and we consider all the facts on a case by case basis.
If you are still in any doubt you should seek professional advice.
Note
-
Profits from the sale of your family home are generally not taxable. However your profits may be taxable if you have a history of regularly buying and selling the properties you live in.
- There is no set figure for the number of properties you can buy and sell before you must consider tax. When you buy any property with the intention of reselling it, the profit may be taxable, depending on your circumstances.
If you are a land dealer, developer, subdivider or builder or are associated with a land dealer, developer, subdivider or builder
There are special rules for people involved in the business of land dealing, developing, subdividing or erecting buildings. These rules also apply when the property is owned by a person who is associated with a land dealer, developer, subdivider or builder.
Your intention when buying a property is usually the determining factor in whether profits from property sales are taxable. However in the case of land dealers, developers, subdividers and builders, if the property is sold within 10 years after it is acquired, the profit may be taxable regardless of the owner's original intention when they purchased it.
For more help
These guides will help you understand whether you should be paying tax when you sell a property:
- The property decision tree.
- Buying and selling residential property - what you need to know about your tax obligations (IR313), found under "forms and guides".
Date published: 25 Feb 2008
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