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If you're buying a rental property, you'll have to pay tax on the rental income you earn. You may also have to pay tax on any profit when you sell the property.

Generally, any profit you make on the sale of a rental property is taxable when you:

  • bought the property and you had a firm intention to sell it
  • have a history of buying and selling
  • sell it within the applicable bright-line period
  • or a person you’re associated with are in the business of property dealing, developing or building and the property was bought for the business.

What you need to know when you buy and sell

Renting out investment property

Example: Joe and Gail buy a second property

What happens when there's more than one reason for buying a property?

Joe and Gail own their own home. They buy a second property as a rental. While they hope that in the long-term, the property can be sold for a profit if needed, their reason for buying the property is for rental income. They had not decided to sell the property at the time they bought it.

They do have to pay tax on the rental income. However, any profit from the eventual sale of the property is unlikely to be taxable, unless it is within the applicable bright-line period.

Last updated: 28 Apr 2021
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