The capital gains of people selling residential property within two years of buying it will now be taxed, Prime Minister John Key announced this morning as part of the Budget package.
The exemptions to this new bright-line test will be if the property sold is the seller's main home, if it is part of a deceased estate or inherited, and or if it is transferred as part of a relationship settlement.
The tax will be on the seller's normal income tax rate.
The move, to take effect from October 1, is expected to address Auckland house inflation which has seen property values increase by 18 per cent in a year and 60 per cent since 2008.
At present, capital gains are taxed if IRD believes it was the intention of the seller to make a capital gain on a property.
That rule will remain in addition to the bright-line test so that if somebody flicked on a property after two years and one day, they would almost certainly have to pay tax on the gain.
The Government will also introduce rules that could make the over-heated Auckland housing market less attractive to non-resident speculators.
The Government had not forecast collecting anything extra in capital gains tax through the bright line test but it will make the rules clearer.
READ ALSO:
•'No surprises' budget announcement set to highlight the big three
The measures include:
- Requiring non-residents and New Zealanders buying and selling any property other than their main homes to provide a New Zealand IRD number.
Requiring non-residents and New Zealanders buying and selling any property other than their main homes to provide a New Zealand IRD number.
- Requiring non-residents to have a New Zealand bank account to get a New Zealand IRD number.
- Including a new" brightline test" to tax gains from residential property sold within two years of purchase, unless it is the seller's main home, inherited or transferred in a relationship property settlement.
- IRD would get $29 million extra funding to enforce the changes, which are subject to consultation and take effect on October 1.
Requiring non-residents to have a New Zealand bank account to get a New Zealand IRD number.
Comment