The new rules around the bright-line test have been hard to miss in recent days, but what do they mean for the average person buying a residential home to live in? The bright-line test has been amended over the years and as such, there are three different rules to consider depending on when you purchased your residential property.

For a residential purchase between 1 October 2015 and 28 March 2018, the bright-line period was just two years; this test is now no longer relevant because if you were to sell your residential property today, it would be outside of the applicable bright-line period. If you purchased your residential property between 29 March 2018 and 26 March 2021 the bright-line period now runs for five years. For the most recent change on March 27 2021, purchasing a residential property will bring you under the new 10 year bright-line period. Knowing which bright-line period applies to you is just the first hurdle.

Understanding the 'main home' exclusion test is a key factor in ascertaining whether you may be caught by the bright-line test. The 'main home' exclusion can only be used when the residential home being sold (before the expiry of the 10 year period) has been used solely as a main home for the whole of the bright-line period, i.e. from the date of settlement to the date of disposal. This exclusion is extended to those that have inherited a residential home or are holding the title to residential property as the executor of an estate.

However, do not be fooled by the seemingly simple use of this exclusion as it comes with some catches. You cannot use this exclusion if you sold your main home two or more times within the two years immediately prior to the bright-line period, or if you have engaged in a regular pattern of acquiring and disposing of residential land.

And that is not all. Consideration then needs to be given to a further 'property sale' rule - your intention when you bought the residential property. If from the outset you had a firm intention to resell the property to make a profit, then you will be caught by the bright-line test.


 

Your solicitor or conveyancer will assist you with correctly completing the required Land Transfer Tax Statement when you buy and sell residential land; they can also check the date you purchased the land to see which bright-line period relates to your situation. The details from the Land Transfer Tax Statement are uploaded to Land Information New
Zealand. The information is collected on behalf of the IRD, who are actively making sure property tax obligations are being met.

The IRD website has a Property Tax Decision Tool online, if you wish to check your situation yourself. Otherwise, if you are selling your residential property and believe you may be caught by the bright-line test, you can talk to an accountant about how to correctly note this in your upcoming tax return.

The KiwiSaver first home withdrawal and First Home Grants are two completely separate processes. However, if you are eligible, the combination of the two can jump-start the process of buying your first home.
The KiwiSaver first home withdrawal allows for early withdrawal of your KiwiSaver savings in order to assist with the purchase of your first home. There are however, limitations and eligibility criteria to consider. These include:
* You must have been a member of and been contributing to your KiwiSaver regularly for at least three years.
* Are buying a home or piece of land for the first time.
* Are buying a home within New Zealand.
* You must live in the home or build a house on the land you are buying.
* You no longer have any interest or share in a previously bought home.
* You are buying one of the following arrangements of property or land: Fee Simple, Stratum Estate (freehold and lease), Cross-lease (freehold and lease), Leasehold, Maori Land.
Provided you meet these criteria, you will be able to withdraw from your KiwiSaver either a specific amount or all of your savings (excluding the initial $1,000.00 Government grant you received when opening your KiwiSaver).
In addition to the KiwiSaver first home withdrawal, you may also be able to apply for the First Home Grant. This is a grant of funds from the Government of between $3,000.00 and $10,000.00, depending on the type of your purchase and your circumstances. Again, there are limitations and eligibility criteria. These include:
* You must have been a member of and been contributing to your KiwiSaver regularly for at least three years.
* Do not currently own land or a home.
* Have not previously received this grant or the previous 'KiwiSaver deposit subsidy' scheme.
* Have a deposit of 5% or more of the purchase price - this can include funds from your KiwiSaver first home withdrawal.


 

* Contributed no less than 3% of your total yearly income for at least three years.
* If you are purchasing on your own; your total earnings have been less than $95,000.00 before tax for the last 12 months.* If you are purchasing as two or more buyers; your total, combined income in the last 12
months is less than $150,000.00 before tax.
* Ownership must be in equal shares when purchasing property with other people.
* The price of the property you are purchasing is within the regional house price caps.
* Are buying one of the following arrangements of property or land; Fee Simple, Stratum Estate (freehold and lease), Cross-lease (freehold and lease), Leasehold, Maori Land.
Assuming you are eligible, you would be entitled to the following grant amounts:
* $1,000.00 for every year you have contributed to your KiwiSaver account, beginning at three years ($3,000.00 minimum) and capping at five years ($5,000.00 maximum) if you purchasing an existing or older home. This grant caps at $10,000.00 for couples or groups.
* If you are purchasing a house and land package/ a property off the plans you may receive $2,000.00 for every year of contribution, beginning at three years ($6,000.00 minimum) and capping at five years ($10,000.00 maximum). The grant caps at $20,000.00 for couples and groups.

The application process for both these schemes is simple. You must complete the required forms supplied by your chosen provider accompanied with supporting documentation such as certified ID and proof of address. Your provider will supply you with a full list of the required documentation. Note applications can take up to 15 working days to process. Your lawyer will be familiar with the process and can assist you with the applications.

In late March earlier this year, the Labour Government announced a number of changes regarding the New Zealand housing policy in an attempt to make the housing market more affordable, particularly for first home buyers. This article specifically discusses interest expense deductions on residential properties and how these will change.

Currently, when owners of residential investment properties (not their main homes) complete their annual tax returns, they can deduct any interest paid on loans from their taxable income as an expense. This reduces the income they earn, thus reducing the amount of income tax to pay.

The Government has proposed to change the rules that enable investors to claim interest on loans as an expense against income for their residential properties. The Government is yet to confirm the details of this proposed change, however, legislation effecting these changes is expected to come into force from 1 October 2021, i.e. owners of residential investment properties purchased after 27 March 2021 cannot deduct interest from their income from 1 October 2021. However, it is expected that there may be an exemption for new builds used as residential investment properties to encourage investors to provide healthy homes for renters. There is also a hopeful expectation that these investors may be permitted to deduct their interest expenses at the time of sale where they are caught by the bright line test and liable to pay income tax on the gain of sale.

Residential investment property owners who acquired properties before 27 March 2021 can still claim interest as an expense, however, the amount that can be claimed will be reduced by 25% over the next four years and will eventually be phased out. The 2025-26 income year will be the first year that interest expenses cannot be deducted from taxable income (with exceptions yet to be confirmed and as canvassed above).


 

Times have changed dramatically in the era of the internet when it comes to the availability of information on just about any topic imaginable. Sourcing online content as a basis for further publication in the public domain has its own set of rules and criteria to consider.

Many authors of published works flaunt the key parameters in this area. In many instances they are never called out on the issue. But where do you stand?

The content could be the publication, display and/or performance of the written word, the spoken word, music, photography, art, films, you name it.

Copyright by general definition is a protectable and assignable legal right given to the original creator of a work. The work is the creator's intellectual property and his or her sole ownership shall be protected by the law for a set period of time. The creator can authorise others to use their work. Usually there is a fee involved together with appropriate quality control and acknowledgements. Publication is allowed then, often for a fixed period.

If you are serious about publication of material content you have discovered by research online, then compliance with copyright around such content can be a minefield requiring legal input to ensure no breaches occur. Saying it was inadvertent is not really acceptable these days. So often there are unfortunate legal, personal and financial consequences. Content sourcing should be as important an aspect of any publication as the actual writing, collating or performance of that finished work.

Originality is hard to source but must be discovered and acknowledged. What do you then do to protect yourself from breaches of copyright both in New Zealand and worldwide? Copyright as a legal concept is "buried" away in a work. Its true source is often hard to find. You will only be using parts, often small, of other copyrighted works but they must be authorised and consented. If you cannot find the original source, you must consider what acknowledgements you can make.

To protect from a breach, you should obtain legal advice around the specific types and forms of copyright infringement. You should assume all internet online content you find is copyrighted.

Those seeking to protect their copyright often employ search engines to check for similar works online. These scans may be intermittent or continuous. Breaches of copyright start and continue from the date of your publication. The absence of a written infringement notice by the original creator does not give rise to an assumption of having avoided such breaches.

So, wherever you stand on the sourcing and use of online content, please beware. The consequences of not doing your due diligence here could be very unpleasant.


 

Removal of incapacitated trustees

The new Trusts Act 2019 has had a far-reaching impact on all aspects of trust law. One of its very sensible and practical amendments is to assist in streamlining the process when a trustee under a trust becomes incapacitated. The outcome is that, where a trustee has lost mental capacity and is deemed medically unable to carry out the trustee function with its related duties, they may be relieved of those duties.
The regular focus on trust administration will mean that trustees' mental capacity will likely be considered on an ongoing basis, however there are currently many trusts with incapacitated trustees.
Prior to the new Act coming into force, the removal of such a trustee required an application to the Court. While the outcome was a foregone conclusion, the time and costs associated with that application often had an impact on the ongoing workings of trusts. As trustee decisions are personal to each trustee and cannot be delegated under a Power of Attorney, an incapacitated trustee brings all that decision making to an immediate halt.
The new Act creates a new process; a Court order is no longer required. A statutory declaration may be completed alongside the relevant trust resolution, which outlines the nature of the incapacity while providing supporting medical evidence (e.g. a letter from a qualified medical practitioner confirming mental incapacity of a trustee). In many instances, trustee changes are required to be shown on titles of property owned by trusts. Land Information New Zealand will accept this statutory declaration as a basis for updating the relevant titles to reflect the trustee change.
The Trusts Act 2019 has now provided a more common-sense approach. However, your lawyer still needs to be in the loop

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