New property tax rules move a step closer

The Taxation (Land Information and Offshore Persons Information) Bill was introduced into Parliament yesterday.

It contains two of the Budget-announced proposals aimed at helping the IRD to better enforce property tax rules

They are:

• The requirement for buyers and sellers of property to provide an IRD number at the time of the property transfer. Overseas residents will be required to provide a Tax Identification Number.

• The requirement for overseas buyers to have a New Zealand bank account in order to get a New Zealand IRD number. This requirement will also apply to New Zealanders who have been out of the country for over three years.

Revenue Minister Todd McClay said the measures will provide extra information which will help Inland Revenue detect people seeking to avoid their tax obligations.

“When people try to get out of paying tax, it’s unfair to all those people who do pay.”

Land Information Minister Louise Upston said it is not illegal to trade property to make a gain, but property traders are subject to tax rules like everyone else.

“The proposals in this bill will see Land Information New Zealand and Inland Revenue collaborating to ensure fairer taxation of people buying and selling residential property for profit.”

The bill will now start making its way through the Parliamentary process, but it is due to be passed in late September and will take effect from 1 October.

Meanwhile, further Budget-announced legislative changes are also in the pipeline.

McClay said that, later this month, he will be releasing a public consultation document seeking views on the introduction of a "bright line" test.

This test would make gains from the sale of certain residential properties sold within two years of purchase taxable.

Under this test an exemption would apply when the property is the seller’s main home, is inherited from a deceased estate or is transferred as part of a relationship property settlement, McClay clarified.

“Most people in New Zealand do the right thing and pay their tax. Inland Revenue will help you get it right, but for those who try to avoid paying, we’re making it harder to get away with it.”