Reality TV: How will capital gains rules affect The Block?

Alex and Corban Walls, contestants on The Block NZ last year. Photo / Michael Craig

Properties renovated on prime time reality television show The Block are likely to be caught by the Government's new capital gains rules.

The TV3 show, which is heading into its fourth season this year, sees four teams, mostly couples, compete to do up houses which are then auctioned off live on television.

Couples get to keep whatever the property sells for over the reserve price and the team with the biggest margin gets an extra $80,000.

Rival renovation show, TVNZ's Our First Home, follows a similar format but three contestant families individually purchase their do-up West Auckland properties and keep the total sales proceeds after live auctions.

The Herald revealed in February that under the current taxation regime, Our First Home contestants would be liable for tax of up to 33 per cent on any capital gain as they were purchasing with the intention to renovate and sell for a profit.

However, The Block properties were bought and sold by production company Eyeworks rather than contestants, making it unclear if the company was subject to capital gains tax.

The last series' winning couple Alex and Corban sold their Pt Chevalier house for $1.552 million in November, giving them a profit of $227,000 plus an $80,000 cash prize.

New Zealand Institute of Economic Research principal economist Shamubeel Eaqub said though the new tax would not be levied retrospectively, future Block properties would be caught if sold within two years of purchase.

He also thought Eyeworks would have been subject to the existing tax during previous series if it had intended selling the properties for profit.

TV3 owner MediaWorks did not respond to a request for comment yesterday.