Revenue Minister Todd McClay says proposals in the bill to supplement the current “intention” test in the Income Tax Act will make it easier for Inland Revenue to identify speculators in residential property and make sure they pay their fair share of tax.
The proposed new “bright-line” test will require income tax to be paid on any gains from residential property purchased and sold within two years. The exceptions are an owner’s main home, inherited property and the transfer of relationship property.
As well as defining the start and end of the two-year bright-line period, the bill contains rules to limit the use of losses arising under the bright-line test, and anti-avoidance rules to prevent companies or trusts being used to circumvent the proposed new rules.
Mr McClay says the proposals in the bill, together with those contained in the Taxation (Land Information and Offshore Persons Information) Bill also before Parliament, will help to better identify speculators in New Zealand’s residential property and ensure they pay their fair share of tax on gains from property sales.
The bill has been referred to the Finance and Expenditure Committee for its consideration and public consultation.