Are you a property investor? Did you know that a relocatable house is classed as a new build? New build houses are now exempt from interest limitation rules for tax purposes. If you’re thinking about relocating a property onto your land or moving a property within your existing section, there may be tax advantages available to you. The Inland Revenue Department (IRD) states that if you relocate a property and obtain a fresh Code Compliance Certificate (CCC), it will be considered a new build and will therefore be exempt from certain taxes.
This means that even if you pick up a house from down the street, move it onto your section, and connect it to services, it will be considered a new build for tax purposes. Additionally, even if you simply nudge your existing house to a different part of your section and obtain a new CCC, it will be considered a new build as well. Plus, relocatable homes are exempt from the extension of the Bright-Line Test, meaning that if you sell after five years, gains made on your relocatable home will not be taxed and mortgage interest payments are also still classified as a deductible expense.
It’s important to note that you’ll need to have a valid reason for moving the property – the reason for the move cannot solely be to avoid paying taxes on your interest costs. For example, if you relocate your house further forward on your section to make room for building a minor dwelling at the back, both the relocated house and the new minor dwelling will be considered new builds and will receive tax incentives.
Interestingly, there is no guidance on how far the existing property has to move within a section. The reason for the move is the crucial factor, not the distance.
Example: Let’s say you own a small house on a section in Tauranga and you decide to move it to the back of the section to make space for another dwelling. In this scenario, the original house and any new properties you build will be considered new builds.
This ruling on relocatable homes and new builds offers a fresh opportunity to save on taxes for property owners in New Zealand. If you are considering relocating a property or moving it within your existing property, it is advisable to consult a professional tax advisor to determine how this ruling can benefit you.
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