The IRD have been keeping taxpayers hot on the heels this last week, sending out correspondence to those taxpayers they believe have a property transaction caught under the Brightline Test.
As a bit of a recap, the Brightline Test requires tax be paid on any capital gain made on a property (that isn’t your family home) if that property was purchased and sold …
- within two years of it being bought between 1 October 2015 and 28 March 2018 inclusive, or
- within five years of it being bought on or after 29 March 2018isn’t your home within 5 years of ownership
As complex as the tax law is around property, we are specialists, and our goal is to establish clarity around the tax treatment of property transactions so that our clients know the tax effects of certain transactions.
With this recent IRD campaign, it does indicate the increasing power and accuracy that the IRD are building with their new computer system. However, the full picture is not always evident at the IRD’s end, which can lead to confusion when receiving correspondence such as this latest mail out. This is why it’s important that tax payers are clear on the tax treatment of their property transactions and can defend this with confidence.
A response to the IRD on this type of topic is a technical matter that is best handled by us, as the experts. If you receive correspondence from the IRD or know of someone who has, please get in touch with us to discuss this further.