New Tax Compliance Measures

Impact on the Transfer of Property (Conveyancing) process

The Government has made changes to improve Tax Compliance in the property sector. These will have a significant impact where we are transferring property for our clients. We are now required to provide tax information by way of a “Tax Statement” to Land information NZ (LINZ) who will then provide this to IRD. A transfer of land will not be able to be actioned unless the required information is provided.

We will therefore now need a lot more detail from our clients than we are presently obtaining. Costs will increase because;

  • A New Zealand IRD number will be required by both vendors and purchasers as part of the land transfer process.  
  • “Offshore persons” will need a New Zealand bank account before they can get an IRD number.
  • As part of the land transfer process, “offshore” buyers and sellers must also provide their tax identification number from their home country.

An individual is exempt from the above rules if they are not an “offshore person” and they are purchasing or selling their main family home. However:

  • The main home exemption does not apply if the property was or will be owned by a trust.
  • The main home exemption does not apply if the person has used the exemption twice or more in a two year period.
  • For the main home exemption to apply the land must be residential land.
  • If a person has multiple homes the exemption for providing the information for the main home can only apply once.

The requirements apply to all contracts entered into on or after 1 October 2015.

In addition to the above changes, IRD proposes that residential land withholding tax (RLWT) will apply to sales of residential property in New Zealand from 1 July 2016 where the vendor is a foreign investor and the property is sold within two years of purchase.

The amount of RLWT withheld would be the lower of:

  • 33% of the vendors gain on that property; and
  • 10% of the sale price of that property.

It is also proposed that the lawyer involved in the transaction will withhold and pay the appropriate amount of RLWT to Inland Revenue.