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You buy and sell a property within two years – no tax on family home

By Steve Brennan

You buy and sell a property within two years

If you buy and sell a residential property within two years, you’ll pay tax on the income you earn from the sale, unless you’re selling your family (main) home or another exclusion applies. This is regardless of your intention at the time of the purchase. A withholding tax may also be deducted at the time of sale.

Deciding if the main home exclusion applies

The person selling a property decides if it’s their main home. You’ll do that based on the exclusion criteria.

You can only use the exclusion twice over any two-year period.

The main home exclusion does not apply if you show a regular pattern of buying and selling residential property.

The tax you pay depends on four things

  1. Your intent when you purchased.
  2. Your history of buying and selling.
  3. Whether you’re in or associated with the property industry.
  4. Whether you buy and sell a property within two years.

It’s your intention when buying a property that matters

Nearly everyone buying a property will sell it at some stage. Most people will hope that their property will gain in value, and we know that an increase in value is common. However, this alone isn’t enough for any profits to be taxed. In most cases you don’t have to pay tax on the eventual sale of your family home. If you bought a property as a long-term rental, then you may not have to pay tax on the sale either.

However, when a property has been bought with the firm intention of resale you’ll have to pay tax on any profit from the sale. The intention to sell does not need to be the main reason for buying the property – it could be one of a number of reasons for buying.

Your history of buying and selling counts

If you have a pattern of buying and selling property, then you may be a property dealer and may have to pay tax when you sell property, even on your family home. If you’re unsure whether you’re a property dealer, you should seek advice from your tax advisor.

Find out more about buying a property to sell

If you’re a dealer, developer or builder

You are liable to pay tax on the profit from any properties you sell, which were bought as part of your property or building business.

Selling within 10 years

If you sell a property you will be liable for tax if the sale is within 10 years of purchase and you were a property dealer or developer at the time you bought the property. This is regardless of whether the purchase was part of your property business or not.

If you sell a property you will be liable for tax if the sale is within 10 years of building work being completed on the property, and you were a builder or in the building business at the time you bought the property. This is regardless of whether the purchase was part of your building business or not.

If you’re associated with a dealer, developer or builder

If you’re associated with someone in the property industry – you’re an “associated person”. This means you may have to pay tax on all or some of your property transactions, even if you’re not personally a property dealer, developer or builder.

These transactions include tax on the sale of a property if you had an association with:

  • a property dealer or developer when you brought the property
  • a builder when significant improvements started on a property.

The associated person rules changed for land acquired on or after 6 October 2009, and the definition of what’s meant by some associations has widened. For more information about associated persons and property transactions, read these guides:

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