New Zealand is cracking down on property tax payments by both domestic and foreign investors.
A new bill, which will help Inland Revenue enforce the tax rules around real estate, was proposed last week by Revenue Minister Todd McClay and Land Information Minister Louise Upston.
The bill, which has since passed its first reading in Parliament, contains amendments to the Land Transfer Act and Tax Admnistration Act, which will require buyers and sellers of property to provide their IRD numbers at the time of property transfer.
Foreign investors will have to provide their Tax Identification Number from their home jurisdiction. (There will be an exemption for New Zealand residents’ main home. They will also need a New Zealand bank account to get a New Zealand IRD number. This will apply to New Zealanders who have been out of the country for three or more years as well.
“These measures 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,” said Mr. McClay.
Earlier this year, the government announced that it would give the Inland Revenue Department an additional $29 million in the 2015 Budget to chase property investors and tighten tax regulations, a decision made in response to growing features about rising Auckland house prices.
“While it’s not illegal to trade property to make a gain, property traders are subject to the 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,” Ms Upston says.”
“These rules won’t unfairly impact New Zealanders who have worked hard to buy their family home, but will help enforce the reasonable expectation that anyone who has obligations to pay tax in relation to their property should pay that tax,” adds Ms. Upston.
The bill has now been referred to the Finance and Expenditure Select Committee for consideration and public consultation. The bill is expected to be reported back to the House in time to be passed by October.