Wednesday, September 9, 2015
New Zealand's Taxation (Bright-line Test for Residential Land) Bill, which contains proposals to tackle non-compliance with tax rules on the sale of residential land, has passed its first reading in Parliament.
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 Taxation (Land Information and Offshore Persons Information) Bill, also before Parliament, is intended to achieve similar goals.
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.