A Beginner’s Guide To Property Tax summary:
Owning a property takes a good amount of money and patience, especially when it comes to paying taxes. Of course, it doesn’t just end with buying a house — it follows regular upkeep and settling bills in order to sustain residence in your chosen property.
Since New Zealand has a lot of land to spare with only a few millions in population, buying land, let alone building a house, can already cost you so much.
Today’s real estate ranges from NZ$300,000 up to around a million dollars depending on the location — Auckland with an average value of over $1 million on housing.
Auckland increased by 2.4% totalling $1,142,700
Tauranga by 6.8% giving rise to an average value of $876,122
Wellington by 3.2% with an average value of $861,794
Hamilton by 2.3% with an average value of $674,562
Dunedin by 1.9% with an average value of $582, 269
Christchurch by 1.6% with an average value of $539,561
Source: CoreLogic House Price Index
Now that we’re on to another year, economists predict a surge of 16% in June 2021. Low interest rates are seen as a major factor in this inevitable increase, making it more difficult for Kiwis to settle into a home. One way to get through this is to find a mortgage plan that can adapt to your needs and income. You can choose which repayment schedule suits you best, leaving more room for savings and other personal expenses.
You don’t only pay for these billings, you also need to pay for local property taxes that are due at the end of the year.
NZ doesn’t apply taxes on residential property that you own except when you sell it in the market. What residents actually pay for are local property taxes, collected annually by local authorities. This form of property tax is used for local public services like maintenance of roads, rubbish collection, landscaping, and more, as mandated by the Local Government Rating Act of 2002.
You don’t need to pay taxes when you’re renting a place. Your landlord or property manager is the one to pay for taxes which should be declared in their income tax forms.
An investment property is a place you decide to rent out or a house you intend to sell in the future. In other words, you expect to profit from either cases. For a rental property, you can deduct these expenses on your rental income tax:
Buying and selling your property can bring a good return of investment in the long run. However, it’s not just about profit, this also includes paying the right amount of taxes each year.
Buying property overseas has tax implications when you’re an NZ tax resident. All your “worldwide income” are taxable under the NZ tax rules. Non-residents are also required to pay a non-resident property tax or GST on their rental property in NZ, as well as tax residents owning property abroad. Tax Implications in NZ continues to apply so long as you’re a registered taxpayer in the country.
If you want to sell property overseas, you can contact a tax agent for property tax assessment and other tax requirements.
The rule simply imposes a tax on a residential home that you sell within 5 years after you bought it unless you fall under the following exceptions:
Otherwise, you will need to pay an income tax on your sold property.
Learn more about it here: The Bright-light Property Rule
Both NZ and the US impose the same tax system in terms of property taxes. Tax rates vary according to the fair market value of the property as determined by the local city council. To make matters simpler for Kiwis, local councils integrate a New Zealand Tax calculator in their respective online pages so they can review their local property tax rates for the year.
Generally, Kiwi citizens and businesses are only obliged to file and pay their Income Tax or also known as Pay As You Earn or PAYE and Goods and Services Taxes (GST). These taxes are used to fund healthcare, public transport and utilities, law enforcement, education, emergency services and so on. Individual and business tax rates differ depending on the income earned for that specific year.
|Monthly Income||Tax Rate|
|Up to $14,000||10.5%|
|Over $14,000 and up to $48,000||17.5%|
|Over $48,000 and up to $70,000||30%|
|Remaining income over $70,000||33%|
Income tax includes the following:
GST, on the other hand, has a fixed rate of 15% that’s added to the price of goods and services which includes items that you buy abroad. No GST is applied to residential rents, financial services, airfares and mortgage payments.
If you have other sources of income aside from your full-time job, you will need a secondary tax code to determine how much you should pay annually. You won’t need to pay for two separate taxes, you only have to take note of the given secondary tax code for proper collection.
|Annual Income & Tax Code||Tax Rate|
|$14,000 or less||10.5%|
|between $14,001 and $48,000||17.5%|
|between $48,001 and $70,000||30%|
Those with student loans are given different tax codes.
GST return and payment are due every 27th of the month. The rest of the key dates for your taxes can be found here.
Doing taxes should be easy if you live in NZ. You can always do your research for tax requirements or inquire with a tax agent for other concerns.
If you've made it this far, then you must already be interested in getting your own property. Make sure you do all the thorough research, even during your idle time! To help you with more funding, get a reliable KiwiSaver fund that works best for you, right here at CompareBear!
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