Rachel Withington
Associate
tel:072620455
mailto:rachel.withington@hobec.co.nz
Qualifications
- LLB/BMS Waikato University 2013
- Admitted to the Bar of New Zealand 2014
Contact
- DDI: +64 7 262 0455
- M: +64 27 507 5167
- E: rachel.withington@hobec.co.nz
Rachel is an Associate in our Property and Commercial team.
Rachel completed a Bachelor of Laws and Bachelor of Management Studies majoring in Economics at the University of Waikato in 2013. Rachel was admitted as a Barrister and Solicitor of the High Court in October 2014.
Rachel is experienced in working with private clients and their related entities and has expertise in a range of areas, including:
- Residential, commercial, rural and horticultural conveyancing.
- Commercial, rural and horticultural leasing.
- Asset protection, including trust establishment, trust management and trust wind ups.
- Estate and succession planning.
- Elder law, including occupation right agreements, residential care subsidies and loans, reverse mortgages and enduring powers of attorney.
- Financing.
Outside of work, Rachel enjoys spending time with her family and making the most of all that the Bay has to offer.
Rachel Withington's Expertise
Rachel Withington's News & Resources
Bright-line Tax Changes – What You Need To Know
It is a bright day for some property owners this July with the relaxing of the Bright-line Test requirement.
What is the Bright-line Test
The Bright-line test sets a out a timeframe where if a sale of a residential property occurs, the profit gained may count as income and therefore be taxable. However, some exceptions or rollover reliefs may apply that sidesteps the Bright-line rule.
The Bright-line Test Historically
From its inception in 2015, the Brightline test was set for a period of 2 years. A first amendment extended the period to 5 years if residential properties were purchased between 29 March 2018 and 26 March 2021. A further amendment was then made for residential properties purchased between 27 March 2021 and 30 June 2024 to have the Brightline period for 5 years for qualifying new builds or 10 years for other residential properties.
Bright-line Latest Changes
As of 1 July 2024, the Bright-line period is reduced back down to 2 years. So, residential properties sold on or after 1 July 2024 that is outside the 2-year period from when it was purchased will not be subject to the new Bright-line test. However, other tax obligations may still apply particularly to those who make a living out of buying and selling residential properties. Tax obligations may also apply if caught by the “intention test”, the idea being that if you buy a property with the intention of re-selling it to make a profit, you can be taxed.
Some Exceptions to the Bright-line Test
The Bright-line test does not apply if you are selling your main home. However, the main home must have been used “predominantly, for most of the time” during the period you own it.
The test also does not apply to residential properties transferred to the executors, administrators or beneficiaries of a deceased estate.
Rollover Relief
A rollover relief may also apply. This is when a transferee to whom the residential property is transferred is deemed to have acquired the residential property at the same time as when the transferor acquired the residential property.
Rollover reliefs may apply between transferors and transferees who are associated persons such as transfers between certain family members, some transfers of trust property, transfers of relationship property or transfers resulting from separations. However, the associated persons must have been associated for at least 2 years prior to the date of the transfer of residential property.
Conclusion
Only so much can be said in this article regarding the tax implications in selling a property. It is always prudent to seek legal and tax advice from a qualified professional when doing so. But at least the time frames for Bright-line which was resulting in profits from many rental property sales being taxed have been reduced from 1 July 2024. Please feel free to contact us for specific advice on your rental property sales.
Reverse Mortgages
A reverse mortgage is a loan for people over 60 years of age that allows them to access equity in their property in order to release cash to them.
We see plenty of clients that have benefitted from these loans in allowing them to e.g. fund necessary improvements or maintenance to their property to enable them to stay in their own home longer or for other purposes such as a more comfortable retirement in light of the increasing costs of living.
The key attraction of a reverse mortgage loan is that you don’t need to make regular repayments, and generally repayments can be made at any time without penalty. Instead, they service the interest every week, the interest is just added to the loan balance and accumulates. Your total loan is repayable upon what is commonly called a ‘payment event’, which is where you may sell your property, move into a retirement village or upon your death. There is a limited ability to transfer the loan to another property if you move.
Interest rates are generally higher than standard registered bank loans and borrowers need to understand the implications of these higher rates. In the current market, property values are not increasing as fast as they have in the past so the equity in your home could be depleted too fast given there are no increasing property values to offset losses.
Due to the accumulation of interest at a higher rate, if you wish to sell your house and purchase a new house, or move into a retirement village in future, this may be more difficult to achieve as the equity you have left in your property may have reduced to an insufficient sum necessary for the subsequent purchase.
Nevertheless, reverse mortgages can be an appropriate way of making funds available to you. The additional funds can support living expenses, healthcare costs or other needs. We are commonly instructed by banks to provide legal advice regarding these loans. Following our advice, our work involves discharging any existing mortgage, registering your new reverse mortgage and attending to any estate matters which may arise as part of our discussion.
If you require any legal assistance on a reverse mortgage, please get in touch.
I want to build in my backyard, now what?
Historically, it was very common for properties to have had some sort of “DIY” building works, whether it be a garden shed, out-house, tree house or internal renovations. These days, it feels like there is so much “red-tape” and cost that comes with doing building work on your land that is very hard to justify doing it (or doing it properly).
So, if you want to build your own shed or addition, this is what you should know:
It’s my land, can’t I just do what I want?
Unfortunately, no. There are rules in place regarding how you can and cannot use your land. This is set out in the relevant ‘District Plan’ prepared by your local council.
You may need to obtain a building or land use consent from the council. These consents give you permission to build a structure or use your land and its natural resources in a way that is not allowed as of right in the District Plan.
Do I need a building or resource consent?
This depends on what you want to do. Generally building consents will be required for any structural building work, new plumbing and drainage works, retaining walls or fences over a certain height or swimming pools. Land use consents, or resource consents, will normally be required for activities such as property development (including building additions or alterations), earthworks, or changes to use of natural resources (ie. water).
If you have engaged a builder or other professional, they will be able to tell you if you need a consent. You can also talk to your local council or look on the council’s website.
If I do need a consent, what do I need to do?
You will need to make an application to your local council. The council will decide whether to grant the consent or not, and may impose conditions on you. It can be a long and drawn out process.
If you have a builder, they will generally apply for any building consent on your behalf. If you need a resource consent and need assistance, our experienced team members can guide you through the process.
What if I need a consent and I don’t want to get one?
If you decide to undertake the work without the proper consent, you will need to be aware that you could later be required by the council to remove or modify the works undertaken. You should also be cautious if you later sell the property, so that the purchaser is not mistaken about it lawfulness of the addition/work.
Do I need to tell my insurance company?
You should talk to your insurance company before you undertake any major works, whether consent is required or not. Depending on your policy, your insurer may require you to obtain a short term construction policy, such as covering loss and damage to materials on site. They may also require documentation on completion, for example, certification from a qualified electrician that works were done to the proper standard.
Holland Beckett Law can help you to determine if your planned works need consent, or with the consenting process.
Changing the Trustees of your Trust
There is currently a Bill before Parliament that will amend many aspects of Trust Law contained in the Trustee Act of 1956. The amendments are likely to come into force in 2019. In anticipation of the overhaul of Trust Law it is a good time to consider whether the current trustees of your Trust are still the best people for the role.
There are various circumstances which may cause you to consider changing a trustee:
Change in Circumstances
A change in a trustee’s personal circumstances can have a direct impact on Trust management. For example, depending on how active your Trust is, a trustee moving overseas creates a geographical barrier that can transform into an administrative circus. With the increasing compliance obligations there are more and more documents for trustees to sign in accordance with specific witnessing requirements, so needing documents to be signed overseas is an added administration expense. In addition, having a trustee based outside of New Zealand can have significant tax implications.
Ageing Trustees
A trustee displaying early signs of dementia or another long-term medical illness should not be taken lightly. Trust Deeds typically direct that all decisions must be unanimous. If a trustee is deemed to have lost mental capacity then unanimous decisions are no longer possible. A mentally incapacitated trustee cannot sign any documentation, including Agreements for Sale and Purchase of Real Estate and even a Deed of Retirement of Trustee to enable them to be removed from Trust property. It is advisable to retire a trustee that falls into this category before they lose their mental capacity. Otherwise, an application to the Court is the only way in which you can remove the trustee and enable the Trust to continue to operate. This is a costly process that can take a number of months. It is important to note that while Enduring Powers of Attorney are very useful documents for dealing with a person’s affairs, they cannot be used for removing a trustee from a Trust.
Adult Beneficiaries
The beneficiaries of your Trust may be your children who are now adults. Perhaps it is suitable for a particular child or children to play a role in the administration of the Trust. It is common for settlors (holding the power of appointment of trustees) to appoint their adult children as replacement trustees in their Will if the Trust is to operate beyond their passing. However, involving your adult children in the Trust during your lifetime could be a beneficial learning experience and lighten the load on other trustees, rather than waiting until your death to thrust the new-found duty upon them.
Professional Trustees
A professional trustee’s retirement from accounting or law may be on the cards or you have moved your Trust’s affairs to a new firm. Appointing a new professional trustee or a trustee company could be a prudent change and is often easier to do while your existing independent trustee is still around and able to sign documents.
A change in trusteeship is usually formalised by a Deed of Retirement and Appointment of Trustees to be signed by the retiring, continuing and new trustees. Once the deed is signed, it can then be used as the base document to implement the change of ownership of the Trust’s assets. This could include real estate, shares and other investments. Bank accounts and insurance policies also have to be updated.
Changing the trustees of your Trust is not a two minute task, however, it is a process that enables the smooth operation of your Trust which ultimately benefits all involved. Holland Beckett can guide you through the process. Please do not hesitate to contact us if you have any queries.