October 1st Property Law Changes Explained

Our resident Queenstown tax specialist Daniel Gibbons from Crowe Horwath gives a great layman’s summary of a few key changes which may apply to those looking at investing in property in New Zealand.

With a view to help control property speculation in New Zealand the government announced two key changes that people need to be aware of if they are intending to sell or purchase property from 1 October 2015.

The first change is the deeming of “residential property” sold within two years of acquisition to subject to income tax.

Residential property essentially includes land that has a dwelling on it that can be lived in as a residential abode, but can also include land that has an arrangement to build a dwelling of this nature or land that is capable of having such a dwelling built on it.

There are exemptions that can apply, such as an exemption for a person’s main home. However, there are certain requirements that must be met in order for the exemption to apply.

The second change is the requirement for all property transactions (not just residential property) to complete a “tax statement” as part of the sale and purchase process. This must be completed before a property transfer can be completed.

The details that are required include the persons name and Inland Revenue Department (IRD) number.

If the person is an offshore person then they must also provide their country of residence and their tax filing number from that jurisdiction.

Further, before an offshore person can obtain an IRD number they must open a bank account in New Zealand that has satisfied the Anti-Money Laundering (AML) requirements. As above there are exemptions that can apply. In most cases these are restricted to New Zealand residents for their main home.

The law changes impose important requirements on offshore persons to ensure they have a bank account and IRD number before settlement otherwise the property transaction cannot be completed.

In addition to changes for individuals, there are many trusts in New Zealand that hold property which currently do not have IRD numbers, these will now be required to obtain an IRD Number.

Like any taxation rules, there are always subtle differences that can apply and change the outcome from what is expected, so it is essential that you get the necessary advice so that you are fully aware of the implications.

Daniel Gibbons - Property Tax Specialist, Crowe Horwath.

Disclaimer -

This advice is general in nature, current at the time of production. It has been prepared without taking into account your personal circumstances. You should seek professional advice before acting on any material.