Taxation tips

Tax trap:

Landlords inexperienced in property investment and tax matters need to be careful when they decide to sell an investment property.

If the property has been held in an LAQC (Loss Acquiring Qualifying Company), in a partnership or in their personal name over a number of years and depreciation has been claimed, it is important to sell the building part of the property at around book value otherwise a tax liability will be incurred as a result of recovering depreciation on the sale, i.e. the selling price of the building is greater than the original cost price less depreciation claimed (the book value).

Remember, seek sound advice BEFORE selling the property.


Declare all income:

Clients seeking the services of accountants to prepare business accounts and returns for rental properties should also give their accountant details of all their other income. This includes interest from bank accounts and any other investments plus dividend statements for shares they have purchased. In New Zealand all income is taxable including world wide income.

The overseas income and any tax paid is converted to NZ dollars and entered in their NZ tax return. There is, therefore, no duplication of the tax already paid overseas.


Claiming deductions:

Many taxpayers don’t deduct all of the costs available to them – are you claiming for home office and entertainment and are you correctly deducting motor vehicle costs?

Many self employed people aren’t claiming any deductions. Are you a labour-only contractor not claiming business expenses?