Residential property withholding tax proposed for offshore sellers

Public consultation begins today on the Government’s proposed residential land withholding tax with the release of a paper seeking public feedback.

Revenue Minister Todd McClay welcomed the release and says the proposed tax would apply only to offshore sellers. He says it is an important part of the Government’s residential property tax compliance work and will ensure tax is paid under the Bright-line test legislation.

“Under the proposed Bright-line test, which I introduced last week, gains from residential property sold within two years of purchase will be taxed, unless the property is the seller’s main home, inherited from a deceased estate or transferred as part of a relationship property settlement.

“The objective is to target those people who are seeking to make a quick gain from property, whether they are based in New Zealand or overseas.

“However, it can be more difficult to collect tax from people speculating on property in New Zealand if that seller lives overseas. For this reason we are proposing that a portion of the sales proceeds are withheld at the time of sale and paid to Inland Revenue as a pre-payment or bond against any tax that may be due,” says Mr McClay.

“We want all people buying and selling property for profit to know that we expect due taxes to be paid.

“Together with the other measures announced in Budget 2015, the proposed withholding tax should go a long way towards bolstering our property tax rules and improving tax compliance amongst property speculators,” Mr McClay says.

The consultation document, a summary of the proposals, and Q&As are attached.

The consultation document, Residential land withholding tax is also available at www.taxpolicy.ird.govt.nz.  Submissions close on 2 October 2015.