No bright-line test for cyclone property buyouts, gov’t assures
No bright-line test for cyclone property buyouts, gov’t assures | Insurance Business New Zealand
Catastrophe & Flood
No bright-line test for cyclone property buyouts, gov’t assures
“The impact of weather events gave the property owner little option other than to sell to the local authority”
Catastrophe & Flood
By
Kenneth Araullo
The New Zealand government has ensured that owners of high-risk flood and cyclone-damaged properties that will take part in the buyout plan will not have to worry about tax rules applying to profits on the sale of their land, most importantly the bright-line test.
Revenue minister Barbara Edmonds said that this test will not be triggered once respective councils begin the government-led buyout of high-risk properties in Auckland, Hawke’s Bay, Tairawhiti, and other regions affected by the severe weather events.
“We remain committed to supporting those affected by the severe weather events. It has been a trying time for many residents and I am conscious that people want certainty,” Edmonds said in a news release. “In some cases, a voluntary buy-out may trigger the bright-line test or one of the other tests for land sales. This could be seen in the example of a property owner who has a rental home they have owned for less than 10 years.”
The bright-line test is a property rule that mandates residential property sellers to pay income tax on any gains if they sell within a certain timeframe. Edmond said that applying this rule would be inappropriate as “the impact of weather events gave the property owner little option other than to sell to the local authority.”
Edmond added that there has already been a precedent for this development, harkening back to the homes that were similarly damaged by the Canterbury earthquakes.
“The amendment will ensure the bright-line and other time related tests do not apply following a government or local authority buyout of a North Island flood or cyclone-affected property. It would be unfair for property owners to be taxed under these tests on compensation payments,” she said.
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