As part of the 2015 Budget, the Government announced changes to the tax rules around property transactions, introducing the 'bright line test'. The new rules will apply to transactions from 1 October 2015. We have previously written an article regarding the content of those changes (please click on this link to view the article
This is an update as to the changes you can expect at a practical level when buying and selling and what information we will need from you to comply with the new rules.
In addition to providing your identification documents and documents that verify ownership of your property we will now also require your IRD number for every transaction involving a transfer of land.
A sale or purchase will not be able to be completed without your lawyer uploading that information into the transfer e-dealing platform set up with Land Information New Zealand and submitting it as part of the property transaction.
The IRD numbers will not become public information like a transfer or mortgage does. However, that information will be passed from LINZ to the IRD so that it can monitor compliance with the new rules.
Each party to a transaction will need to provide this information to their lawyer in a signed tax statement. There are penalties for parties that provide false or misleading information in that tax statement, likely a fine of up to $25,000 for a first offence.
The proposed information at this stage is:
IRD numbers or confirmation that the transaction is exempt from the new rules.
For those of you selling or buying with a 'passive' asset holding Family Trust that has not been GST registered and has not had any reason to apply for an IRD number, these changes mean that the Trust will need an IRD number.
Whether or not the property has a home on it.
Whether the parties to the transaction are related.
If either party is a tax resident in a country other than New Zealand they will need to name the country and provide the IRD equivalent for that jurisdiction.
If you are selling and the property has been your 'main home'.
Regardless of whether your land transaction falls within the new rules and is taxed, or whether the transaction is exempt from the new tax rules, the bottom line is that more information is required from you in order to complete registration of your sale or purchase.