New rules
Is this a new capital gains tax?
No. It changes the existing rules on taxing capital gains in relation to residential property.
How?
At present, if someone buys a property with the "intention" of making capital gain, the profit is taxable. That rule remains but an additional rule says that the capital gain on any sale of a residential property (that includes sections) within two years of purchase will be subject to income tax.
Are there any exemptions?
Yes. The seller's main residence, inherited property and property that is sold as part of a relationship settlement.
Does that mean property speculators will just delay their sales to shortly after two years?
No. Because the existing intention law will remain and sales very shortly after two years will not mean an exemption from the existing rules.
Have rules changed for non-resident property buyers?
They are subject to and will be subject to the same rules on capital gain as New Zealand buyers but new rules about collection of data on them will make it easier to enforce, especially with a $29 million boost to IRD for tax inspectors.
What will non-resident buyers have to provide now?
A New Zealand IRD number on the land process documents, their tax ID from their home country, and they need a New Zealand bank account.( we are not sure yet how this will be implemented)
Who is a non-resident?
Someone who is not a New Zealand tax resident. And that may be a New Zealander living abroad.
What will the result be?
The moves are likely to deter short-term speculators from the Auckland market. The data requirements for non-residents will give the Government new information on who is buying and selling.