New Property Tax Rules – post budget 2015

Brett provides some background and analysis into the raft of new regulations affecting the NZ property market and in particular Offshore owners and investors. Brett Carpenter is a qualified barrister and solicitor and consultant at QCL. He brings considerable expertise particularly in the areas of trusts and taxation together with a wide experience in property and commercial law.

To read more about Brett Carpenter click here To download the PDF version of this document click here.IMG_5893-individual-683x1024

New Property Tax Rules – post budget 2015 

A bill introduced into parliament on 22 June 2015 provides details of new requirements when someone either buys or sells real property in New Zealand. The bill will amend both the Tax Administration Act and the Land Transfer Act.

A second bill will also be introduced shortly to unveil the rules for the new ‘bright line’ test imposing a capital gains tax. We will provide details as soon as the legislation has been drafted.

*Please Note

The first bill is really just an information gathering exercise which places the obligation on people (and other entities) buying and selling property to provide certain information to IRD. It applies to both residents and non-residents alike.

This data is to be collected by lawyers (and conveyancers) and filed with Land Information New Zealand which will in turn pass it on to IRD. So be prepared for increased compliance costs!

In simple terms the new legislation will require the information (Tax Statement) to be provided by both the buyer and seller of residential property before the transfer of legal title from seller to buyer can be registered.

The Tax Statement must include all of the following information:

  • The person’s full name;
  • The IRD number of the person;
  • The persons bank account details;
  • Whether the person is or is not treated as tax resident in a jurisdiction other than New Zealand and
    • The name of that jurisdiction; and
    • the country code for that jurisdiction (as prescribed by IRD); and
    • the equivalent of the persons IRD number in that jurisdiction.

Where a party does not have a New Zealand IRD number they must obtain one before they can complete registration of the transfer of the property. A bank account is also required as IRD numbers will not be issued without bank account details being provided.

You will be exempt from having to provide the information above where you are not an offshore person and the property is or will be your main home. You will still have to make a statement to that effect. The Tax Statement will however still be required if you hold the property as a trustee or you have bought or sold at least 2 houses in the preceding 2 years.

For the purposes of the new rules, an “offshore person” is given a different meaning than those found in the Immigration Act or other existing legislation such as the Overseas Investment Act. The new definition and is included in the Tax Administration Act 1991.

“Offshore person” will mean:

For an individual

• A New Zealand citizen who is outside New Zealand and has not been in New Zealand within the last 3 years;
• A person who holds a resident class visa granted under the Immigration Act 2009 and who is outside New Zealand and has not been in New Zealand within the last 12 months;
• A person who is not a New Zealand citizen and does not hold a resident class visa granted under the Immigration Act 2009; and

For a body corporate or an unincorporated body, including a trust, an overseas person means

• a body corporate incorporated outside of New Zealand or which is a 25% or more subsidiary of a body corporate incorporated outside New Zealand.
• a partnership or other unincorporated body of persons (not being a trust) if 25% or more of the partners or members are overseas persons
• a trust if 25% or more of the governing body are overseas persons’; or
an overseas person or persons have a beneficial interest or entitlement to 25% or more of the trust’s property; or
25% or more of the persons having the right to amend or control the amendment of the trust deed are overseas persons
This is only the first reading of the bill and there may be changes before it becomes law. We will keep you updated on any developments etc

The legislation is intended to take effect from 1 October 2015.

If you think these changes will affect the reporting requirements on your NZ investments get in touch with the team at Queen City Law. We are experienced at representing Offshore investors and business owners. Click here to find out more about our services.

Comments Off on New Property Tax Rules – post budget 2015

Tags: