Property Tax – If you are a landlord, then you are in business

Property Tax – Landlords and trusts – you’re in business!

Well there’s something they probably didn’t tell you about being a landlord, and probably not something you thought about when you were crunching the numbers on whether it was a good investment or not… TAX! Like it or not, if you rent out your property or earn money from it, then you are running a business! That means there are legal obligations that need to be met and property tax that has to be paid.

Here’s something else that unsuspecting mums and dads might not be aware of, if your home is in a trust, then you must file an annual return unless you have filed a non active trust declaration, even if it’s your family home and you don’t earn any money from it.

Property investment is booming! In Auckland the banks had to enforce higher equity to lending ratios in an attempt to slow the market down. That also means, there are a lot more people out there that are in business and possibly unaware of their legal obligations with regards to property.

The IRD imposes hefty penalties on those that do not declare income, and rental income is no exception. As with all things business, processes and rules are constantly changing eg. The recent changes to property law, which included residential land withholding tax and the new bright line test for property that is sold within 2 years of purchase.

It’s a good idea if you haven’t already, to find a reasonably priced tax agent or accountant to help you with your returns.  Good ones will be aware of the relevant property laws and claimable expenses, to help reduce your tax liability and hopefully keep more of that income in your pocket, and keep the IRD happy too. Business Allsorts specialise in helping mum and dad investors at very affordable rates. If you are not sure where to start, contact them and they will point you in the right direction.

 

Some free resources to get you started

Rental Property Guide

Here is a really good place to start if you want to know more about your tax obligations and property tax. IRD have lots of resources on their website.

This property tax guide is a good place to start.

The guide covers off the key areas that you need to know about regarding rental property income tax

  • Tax Returns
  • Depreciation
  • Holiday Homes
  • Services you might need

To check out other resources from the IRD you can head to their website: www.ird.govt.nz

Maree Wallace is the owner and operator of Business Allsorts, a company dedicated to helping mum & dad investors and small businesses with all aspects of managing their IRD obligations. For more information on the services they provide and how they might be able to help yours, visit their website: businessallsorts.co.nz