The government has recently introduced new tests to improve property tax compliance when buying and selling property in New Zealand.
Some have suggested that the true reason behind the tests is to curb property speculators and scare off foreign buyers. Regardless of this, the new tests are seen as an attempt to limit soaring house prices in New Zealand and enhance compliance with existing tax legislation.
Anyone buying or selling a property in New Zealand is now required to make disclosure to the Inland Revenue Department (“IRD”). Without this information the Transfer cannot be registered. The IRD is collecting information about the property including whether there is a home on the property, the identity of the transferor and the transferee, and whether they (or a member of their immediate family) are New Zealand Citizens (or holders of a resident, work or student visa). Buyers are required to advise whether a member of their immediate family intends living on the land.
IRD numbers
There are a number of exemptions where tax IRD numbers are not required to be given to the IRD. Generally, unless the property is going to be used for the buyer or a member of their family living on the land, the IRD will require tax details. Many family trusts do not have IRD numbers already and are therefore required to apply for one when transferring property.
It is increasingly important that buyers or sellers know early in the process the person who is intending to complete the purchase. That purchasing entity will need an IRD number. There is an exemption from providing an IRD number if the property being purchased is the main home for the buyer or members of the buyers family.
Don’t be surprised if your lawyer now asks for a lot more information from you when you are buying or selling property. For more information please feel free to contact one of our Property Team to discuss.