The Government announced in May a range of measures relating to property transactions, including new measures to tax capital gains on homes and to track the number of foreign buyers.
We have now received the detail relating to this – the Taxation (Land Information and Offshore Persons Information) Bill has recently received its first reading and been referred to Select Committee for consideration.
In a nutshell:
- All buyers and sellers of property (whether NZ resident or not) will be required to provide their IRD numbers as part of the conveyancing process. The only exception to this is where the person is a New Zealand resident and the sale or purchase relates to their "main home", unless:
- they are selling their third "main home" in a two year period; or
- they are owning or will own the particular property as trustee (ie, if your family home is held in a trust, the trustees will have to provide their IRD numbers).
- Buyers and sellers who are tax-resident in another jurisdiction (whether or not they are also NZ resident) will also have to state the other jurisdiction and provide the equivalent of their tax identification number from that other jurisdiction.
- Any person who doesn't have an IRD number will be required to acquire one before the property transaction takes effect.
- Any "offshore person" will be required to first open a New Zealand bank account before a New Zealand IRD number. In addition to non-New Zealand citizens and residents, this will include:
- New Zealand citizens who have not been in New Zealand within the last 3 years;
- New Zealand residents who have not been in New Zealand within the last 12 months;
- New Zealand incorporated companies who would be considered an "overseas person" under the Overseas Investment Act 2005.
Providing false or misleading information in the tax statement will be an offence subject to a maximum fine of $25,000 for first offenders and $50,000 for any subsequent offence, so the penalty for non-compliance is potentially high.
In addition, because this information will be required before a transfer of property is completed, this will mean that there is an additional layer of information needed in any property transaction which could cause delays. This should be taken into account in any settlement timeframes.
The Bill is current expected to take effect from 1 October 2015. There is a very limited opportunity to make submissions on the Bill – submissions are due by 9 July 2015.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.