The Government is tightening up land transfer documentation rules to prevent property speculators avoiding their obligations to pay tax on capital gains under the bright line test.
Revenue Minister Stuart Nash said under current rules, up to a third of residential property transactions are made without the IRD number of the buyer or seller being recorded, potentially making it possible for people to avoid their tax obligations under the bright line test, which taxes capital gains on residential investment properties that are bought and sold within five years.
The bright line test may also apply to family homes if they were purchased with the intention of reselling them at a profit.
"Most people already provide their IRD number to Land Information NZ when buying and selling property, but there are some exemptions which are open to manipulation," Nash said.
The rules would be changed so that an IRD number would need to be supplied for virtually all residential property sales.
"The requirement to provide an IRD number on nearly all land transfers makes the rules easier to understand for everyone," Nash said.
"It removes the uncertainty around what information people need to provide when buying or selling a property.
"Capturing the relevant tax information will also help us work with jurisdictions in other countries to combat global tax evasion," he said.
The new rules will apply from January 1 2020.
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25 Comments
Great news. Well overdue. But better late than never.
Sacrilege!
To think taxes might be required to be paid on property , the staple of NZ capitalism
it should be implemented straight away..
Damned right and the IRD should specifically probe evasion too its not difficult ~ take the QV database and run a search for flips within the 2 year time period. See who flipped it and check vs the tax return. Hey presto.
Just to clarify - the BrightLine test has been 5 years since March 2018. The 5 years is effective only to property purchased after 29 March 2018 - prior to that it was 2 years. As we have gone more than 2 years since the introduction of the 5 year period, the 2 year period no longer applies - all properties purchased prior to 29 March 2018 will no longer attract any BightLine tax.
Eh? We have not gone more than 2 years from the introduction of the 5 year period.. we have gone just over one year.
Property purchased 1 march 2018 will still be liable for the brightline test if sold before 1 march 2020. It was purchased while the two year period was in effect, and it remains in effect.
"If you entered into an agreement to purchase residential property on or after 29 March 2018 and sell it within 5 years, you’ll need to consider if it is taxable under the bright-line test. If a property was purchased on or after 1 October 2015 through to 28 March 2018, the bright-line test will look at whether the property was sold within 2 years." https://www.classic.ird.govt.nz/news-updates/brightline-extension.html
Apologies - ahead of myself.
Remember NZ is the country that let anyone set up a Finance company with a shonky prospectus
It cost NZers over $5Billion in losses of life savings
Nobody will be searching back 2 or 3 yrs on flipped property sales
Just hope this government implements a insured bank deposit guarantee first ? Where is it Jacinda ? Winston ? Why are Kiwis left unprotected ?
As I have said all along...if I didn't know better I'd have thought the CGT was purposefully kneecapped from the get go in lieu of this sort of system being the true objective all along....there will be some serious nailbiting going on in the halls of the property game and money laundering enterprises with this announcement...oh well there's always itunes cards!
Wasn't there analysis on this site earlier suggesting compliance with tax law around this was pretty low?
Hopefully this will help reduce this sort of tax evasion.
Low? In my experience its non existant. Mid decade I was working for a house building company that accepted cash payments for houses from asian buyers, theres no telling whats been going on!
I'm sure our leaders of great integrity had no clue any such conduct could have been occurring.
I wouldn't bet on it
There are still more holes in the cheese yet. If you don't do anything wrong you'll have no worries.
Good news!
(I have to admit that I thought gst and bank account registration on S & P agreements were put in place by the previous government, maybe that was only for transactions with foreigners?)
Surely the sensible thing to do is have a land registry with the IRD numbers of all owners and passport details of all foreign owners or those with beneficial interest through trusts or corporate holdings.
Nah don't be silly, those rules would only be for the little people. Not for people with real money
Nope, such a register would provide prima facie evidence of any tax dodging and provide clear evidence too of any non residents trying to usurp the FBB.
So CGT is back with diffrent name (Though existed earlier but was toothless).
So will the sentiments change again (Negative) if the sentiment had changed to positive when CGT was not announced - as per so called experts.
Reality is housing market is in hibernation and not for months but years :) and one does not have to be an expert to know it - just go out in the market /auction and....
Peer to peer realestate transactions will take off as a result of the quiet market, save $15k commission and sell it yourself!
It beggars belief that a bright line test would be introduced without putting in place the means to identify sales and purchases . What a load of muppets the politicians and the people in Ministries who create this drivel are. As usual the ordinary honest person gets to have their information targetted and the crims will be yards ahead and have loopholes not yet forseen by the bureaucrats
AND the criminals will still be yards ahead
The new rules will apply from January 1 2020
Why a small country of our size and infrastructure need this much time to implement a rule?? This could be used as another marketing tool by R.E
All are same be it Labour or be it National - Politicans.
Why has it taken so long.
Sufficient legislation already available.
More window dressing
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