OVERVIEW
Overview
Where a property is registered under a rental business, it can be excluded from the house count when the single-house exemption for the resident home is assessed. That benefit holds only while the mandatory rental period is served and the rent increase limit is observed. The requirements differ according to when and in what category the property was registered, and since repeated changes to the scheme introduced automatic and voluntary deregistration, identical circumstances can produce different outcomes depending on the registration date.
VALUE Tax & Accounting begins by checking the registration category, the registration date and the history of the lease agreements to establish whether the requirements are still being met. Because the resident home exemption is in principle available only once in a lifetime, which property to sell and when must be calculated first. Where a rental property has been deregistered automatically we confirm the deadline within which the resident home may be disposed of, and where requirements have been breached we quantify the recovery in advance and set the approach accordingly.
KEY ISSUES
Key tax issues in registered rental housing
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01
Mandatory rental period and rent increase limit
The mandatory rental period set for the registration category must be served, and the rent increase limit must not be exceeded on renewal or on a new agreement. A breach in a single agreement puts the whole benefit at risk.
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02
The resident home exemption, once in a lifetime
Selling the resident home free of tax while holding registered rental housing is in principle available only once in a lifetime. Which property that opportunity is used on must be decided first.
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03
Treatment after automatic or voluntary deregistration
Following reform of the scheme, registration in certain categories lapses automatically when the mandatory period ends. A deadline applies within which the resident home may then be disposed of, so timing must be managed.
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04
Published price requirement at the start of the tenancy
The published price at the time the tenancy began must be at or below a specified amount for the relief to be available. Registration alone does not qualify a property.
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05
Breach and recovery
Where the requirements are breached, tax on a resident home already treated as exempt is recovered and penalty tax is added. The later the breach is identified, the greater the liability.
HOW WE HELP
How VALUE Tax & Accounting responds
Reviewing registration status and requirements
We check the rental business registration category and date, together with the deposit and monthly rent recorded in each lease agreement, and assess whether the requirements are still being met.
Setting the order of disposal
We calculate which property the resident home exemption should be applied to and the deadline that runs after deregistration, and propose the order and timing of sales.
Responding to a breach
Where a breach is identified we first quantify the tax and penalty tax at stake, and set out how an amended return and voluntary payment can reduce the liability.
FAQ
Registered rental housing FAQ
Q What happens if the rent is raised above the permitted limit? expand_more
A breach of the increase limit removes that property from the relief, and the resident home exemption already claimed can be recovered. The permitted increase should be calculated before the agreement is renewed.
Q If registration lapses automatically, is the benefit lost? expand_more
Automatic deregistration is not itself a breach, so benefits already received are not recovered. A deadline applies, however, within which the resident home must be sold for the exemption to hold.
Q Can the resident home exemption be claimed twice? expand_more
In principle it is available once in a lifetime. It cannot be claimed repeatedly by moving between properties, so deciding which property to use it on matters.
Q What happens if the rental registration is cancelled voluntarily? expand_more
This depends on the category and the timing. Voluntary deregistration after a specified proportion of the mandatory period has been served is treated as an exception under which the benefit holds; otherwise the benefit is recovered.
Q Is there relief when the rental property itself is sold? expand_more
Long-term rental housing that meets the requirements can qualify for a special long-term holding deduction or for tax relief. This depends on the registration category and the rental period and must be confirmed case by case.