NEW PROPERTY TAX COMPLIANCE REQUIREMENTS
- THE BRIGHTLINE TEST From 1st October 2015, those buying and selling residential property will have another layer of
bureaucracy to content with. Anyone entering into a contract after this date (other than in relation
to Maori Land) will be required to provide a tax statement to the Land Office.
An IRD number must also be provided unless the property is the main home of the person buying or
selling the property (the “Main Home Exemption”). However, the Main Home Exemption can only
be claimed twice in any two year period. After that, the seller or buyer has to provide an IRD
number.
Overseas buyers will not be exempt. They must provide and IRD number and if they are tax resident
overseas they will also have to provide a Tax Information Number (“TIN”), even if they are also
resident in New Zealand.
Trusts are not exempt either – for more details please see our information sheet (link to Trusts
page/Jennie’s article).
The data will be captured by the Land Office when properties are bought, sold or transferred.
WHAT THIS MEANS IN PRACTICE
When you instruct us to act for you in your sale or purchase, we will ask you to complete a Land
Transfer Tax Statement.
If you qualify for the Main Home Exemption or any of the other exemptions, you can tick the
relevant box and then sign the form. We will then file it with the Land Office online.
If you do not qualify for the any of the exemptions and you do not have an IRD number, you will
have to apply for one. It can take up to ten days for the Inland Revenue to provide an IRD number so
you need to build in enough time for this when agreeing your settlement date.
WHAT ARE THE TAX CONSEQUENCES
The information will enable the IRD to follow up on those who have property tax obligations.
Anyone selling a residential property within two years of purchase (referred to as the “Brightline
Test”) will be taxed on the gain they make, unless they can claim one of the exemptions.
TRANSITIONAL ARRANGEMENTS
Transfers based on contracts entered into before 1st October 2015 are exempt from these
requirements as long as they are registered on or before 1st April 2016.
WHAT SHOULD YOU DO?
If you are thinking of buying or selling property, make sure you contact Knapps early and preferably
before you agree your settlement date.
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