IRD Investigating all sales since 2002

[cube]

At the APIA meeting last night, we were told that the IRD, on the back of investigations in Auckland and Queenstown, had uncovered $105,000,000 of unpaid tax!

They have now been given $15,000,000 extra (which may be the same $15,000,000 they were given last year - wasn't clear) to investigate every sale from 2002 to 2008 to check for tax liability.

There is a booklet available, and a form to make a voluntary declaration before the IRD decides to audit you.

The IRD has produced a guide, IR313 ,to help people decide if they should be paying tax on their property transactions, but it is fairly basic, and does not cover such things as Trading Trusts -vs- Buy and Hold Trusts etc., so I recommend that you talk to you accountant before making a declaration and inadvertently putting your foot in it!

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[SuperDad]

Great news.

Paul.

[cantthinkofanickname]

That sounds BAD, not for the traders who we know always declare the taxes.But for ma & pa investors who thought it would be a good thing to buy and sell in the hype .If you think blue chip is bad just wait till the IRD finishes their probes in to the nether regions. Im picking there will be a queue on the bridge and they wont be waiting for the bungy.

[SuperDad]

People should be aware of their tax obligations.

I met one smug smug SOB who delighted in telling me all of the different excuses he has lined up if the IRD ever want to know why he buys and then sells again so soon afterward.

I hope he gets done.

Paul.

[cube]

For people like that, who know they are avoiding their obligations, I have little sympathy, but undoubtedly there will be people who have been poorly advised or who fall in to a 'grey' area (e.g. renovating their PPOR and moving a couple of times, but for reasonable reasons to all but the IRD).

Given the probable penalties (12.5% GST, 33-39% tax + penalty interest + fine), this could add to the general mess in the market over the next few years.

Also mentioned was that the IRD is looking closely at regular TradeMe traders (not just property).

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[drelly]

Who did this info come from and can it be verified?

[cube]

Dianne from APIA had had a meeting with IRD during the week, and this was the outcome.

The pamphlet and voluntary declaration form are dated December 2007, so it's obviously something they have been working up to.

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[Jumpin]

Given the probable penalties (12.5% GST, 33-39% tax + penalty interest + fine), this could add to the general mess in the market over the next few years.

cube

So we could surmise that the IRD is responsible for some of the excesses in the market, because they haven't been collecting all the taxes due?

Yeah, good on them, the rules is the rules- I hate taxes, but its part and parcel of living in society.

[Gatekeeper]

So we could surmise that the IRD is responsible for some of the excesses in the market, because they haven't been collecting all the taxes due?

True !!

Yeah, good on them, the rules is the rules- I hate taxes, but its part and parcel of living in society.

agreed

[[email protected]]

Fantastic news. The only sad part will be the people who have liabilities because of incompetent accountancy advice. As for the avoiders and evaders it is a good thing.

[drelly]

I wonder if they will offer a "bounty" for information leading to fines? If interest rates rise much more, I might need to supplement my income! Muahahahahaaaa....

[CJ]

Dianne from APIA had had a meeting with IRD during the week, and this was the outcome.

The pamphlet and voluntary declaration form are dated December 2007, so it's obviously something they have been working up to.

Correct. Also, some guy from the IRD was also on Breakfast (TV1) this morning. Didn't hear all of it but it sounded like the same message.

Why is it that they are late in jumping on the bandwagon. This has been an issue for the past 4-6 years, and now they come in once the market is starting to dip and people are coming more cashflow constrained. (Note: I agree with them doing it, they should have just done it sooner. I am sure people would prefer to be caught out after 1-2 transactions than 5+)

[drelly]

CJ, haven't you heard? We have a deficit! They need to make up the difference somewhere.

[PC]

The big question should be why is the tax law so convoluted and obtuse?

Stupid thinking, Stupid laws?
Or is it just creating jobs for the boys (lawyers & accountants)?

[SuperDad]

The big question should be why is the tax law so convoluted and obtuse?

Stupid thinking, Stupid laws?
Or is it just creating jobs for the boys (lawyers & accountants)?

I think that the sections of the Income Tax Act 2004 that they will be applying are pretty straightforward. The difficulty will come in proving intention - but a person who buys with the intention of reselling for a profit knows what their intention is.

The problem, if there is one, is lack of public awareness about the rules. There is a widespread belief in NZ that there is "no CGT on property transactions". while this is strictly speaking true, I believe that it has lead to the belief that property transactions are tax exempt, full stop.

Paul.