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Government acts to target property speculators

The Government announced tax measures yesterday which will target taxpayers who purchase and sell properties within a short period of time in the hopes of making a quick dollar. Although the law already taxes property acquired with the intention or purpose of disposal, the legislation is currently seen to be difficult to apply. Furthermore, even if it is clear that a person should be paying tax, it’s not always easy for the Revenue to track down foreign property speculators. To this end, the Government has also announced measures which will specifically target non-residents.

For property acquired from 1 October 2015, the proposed changes are:

  • New Zealand tax residents and non-residents will have to provide an IRD number whenever they purchase or sell a property which is not their main home.
  • Non-resident buyers and sellers will have to provide their overseas equivalent of the New Zealand IRD number, along with other identification (for example, their passport).
  • Non-residents will have to open a New Zealand bank account before an IRD number can be issued (this measure is intended to ensure that current anti-laundering rules will apply to the non-resident).
  • Any person who purchases a property and disposes of it within two years of acquisition will automatically be subject to tax. This will not apply, however, where the property is the seller’s main home, or if they inherited the property, or if the property is transferred as part of a relationship property settlement.

To prevent non-residents from flouting the proposed rules, the Government is also considering the possibility of a withholding tax as a mechanism for collecting the taxes owed.

An issues paper is expected to be released in July as part of the consultation process, with legislation to be introduced in August 2015.

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