Here are my 4 important things you should know if you’re thinking about buying or selling property.
๐ญ. ๐๐ป๐๐ฒ๐ป๐๐ถ๐ผ๐ป ๐ฅ๐๐น๐ฒ
Generally, if you buy property with the intention or purpose of reselling it, you’ll have to pay tax on any profit you make from its sale. This is called the intention rule.
This applies to both commercial and residential property. So you need to think about your intentions when you first buy a property. What you intend to do with it will determine your tax when you go to sell.
The intention to sell does not need to be the main reason for buying the property – it could be 1 of several reasons for buying.
This usually does not apply to your main home or if you bought the property as a long-term rental investment. More on this below.
๐ฎ. ๐ ๐ฎ๐ถ๐ป ๐๐ผ๐บ๐ฒ ๐๐
๐ฐ๐น๐๐๐ถ๐ผ๐ป ๐
Your main home is the property where you live for most of the time.
If you have more than 1 property, it is the one you have the greatest connection to. You cannot have more than 1 main home.
Which property is your main home depends on:
โ
the amount of time you spend living in each house
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where your immediate family lives
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where your personal property is kept
โ
where your social ties are strongest
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your use of the home
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what other ties you have with the surrounding community – for example, your job, business or finances.
๐ฏ. ๐๐ณ ๐๐ผ๐ ๐ต๐ฎ๐๐ฒ ๐๐ฒ๐๐ฒ๐ฟ๐ฎ๐น ๐ฟ๐ฒ๐ฎ๐๐ผ๐ป๐ ๐ณ๐ผ๐ฟ ๐ฏ๐๐๐ถ๐ป๐ด
The intention to sell does not need to be the main reason for buying the property – it could be one of several reasons for buying.
For example, if one of your intentions when buying is to flip the property, even if you rent it out, you’ll still need to pay income tax on your profit when you sell it.
* Flipping a property generally means you buy it intending to quickly resell it. This may mean you renovate the property before you resell it.
๐ฐ. ๐ง๐ถ๐บ๐ฒ ๐ณ๐ฟ๐ฎ๐บ๐ฒ๐ ๐ฎ๐ป๐ฑ ๐๐ต๐ฒ ๐ฏ๐ฟ๐ถ๐ด๐ต๐-๐น๐ถ๐ป๐ฒ ๐๐ฒ๐๐
The intention rule applies no matter how long you keep the property before selling it.
The intention rule also applies before the bright-line test, which only applies to residential property sold within a set period of time โ the bright-line period.
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