Part of the new law on property tax has now been passed.
The main points are:–
- Covers contracts entered into after 30 September 2015.
- IRD numbers are needed in all cases unless a resident is buying or selling the main home. [Note – there can only be one main home.]
- A bank account is needed by all offshore persons (non-New Zealand citizens or non-NZ permanent residents) plus all NZ citizens who have not been to New Zealand for three years – before IRD will issue an IRD number.
The second part is yet to be finalised and is due to be reported back on October 22nd. It would then apply retrospectively from October 1st.
It provides that:-
- A family home owned by a Trust will not be the main home unless it is the main home of a settlor of the Trust and the settlor has no other home. A home for a child held in a Trust will therefore not qualify.
- Profits on sales made within two years on properties (other than the main home) will be taxed. Losses will only be offset against profits of the same type (which will be rare).
Many trusts will now need to get an IRD number, although there is now provision to apply to IRD to be a non-active trust for tax purposes. This is a relief!
Although the stated purpose was to discourage offshore investors overheating the Auckland Market, IRD will now have more information routinely available on property transactions. The aim is to look at those particularly in the construction / development industries who frequently change their main home, and to charge tax on profits.
Timing of sales will need to be carefully planned if they are likely to be within the two year time frame. Advice will be crucial.