Are You Aware of the Property Tax Law?

Posted: 7 November 2017

On October 1, 2015 new changes to New Zealand tax laws in relation to property were introduced.

As lawyers, we are now required to have every party to a sale and purchase agreement sign a tax statement. We are then obliged to hold that statement on our records for 10 years.

The statement will include such information as whether you are the buyer or the seller and whether there is a home on the land or not. You will also state whether you make the declaration for yourself or in another capacity such as director or trustee.

Part of the declaration deals with your status in New Zealand. For example are you a citizen or someone who resides here pursuant to a Visa of some kind.

If you are buying the home for your own personal use you are able to claim the main home exemption from providing your IRD numbers. This exemption cannot be claimed more than twice in any two year period. This rule will catch anyone buying and selling property and living in them for a short time but with the ultimate intention to on sell for profit regularly.

If you are buying or selling a property which is a rental or investment property then we must obtain your New Zealand IRD numbers. If you bought the property less than two years prior you may be subject to tax on any profit.

If you do not have a New Zealand IRD number you need to obtain one. This has adversely affected some offshore sellers who at the time of purchase did not require a New Zealand IRD number to complete the purchase but now do require one in order to sell. Getting a New Zealand IRD number for an offshore person requires that person to have an operational New Zealand bank account. Under the new regulations family trusts also now need to have an IRD number even if their only purpose is to own the family home.

You are also required to disclose with you have any tax identification numbers in other countries and if so to declare that number on the declaration. 

The main thing to be aware of is that the new tax laws make it all the more essential for buyers and sellers to deal with an experienced conveyancing practitioner. At Kannangara Thomson dealing with property is our core business and we are happy to assist you with any property matters you may have. 

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