Government tightens belt for offshore investors
The residential property market in New Zealand is always changing, and it's important to stay up to date with the latest happenings – especially when it concerns residential property investment! After the Reserve Bank made noises about tightening the rules for property investors, the government has followed suit with a new set of policies of its own.
As part of the upcoming 2015 Budget, Prime Minister John Key has announced that there will be a few measures in place to make sure that people who buy and sell property for profit pay enough tax – including overseas buyers. The policies are designed to take some of the air out of the fast-expanding Auckland market, where prices have been skyrocketing far above those anywhere else in the country, and where speculation has been rife.
Mr Key pointed out that these changes will build on policies already in place, and will make sure that the residential property market is much fairer going forward.
"Everyone – whether from New Zealand or overseas – should pay their fair share of tax according to the law. So we need to ensure the existing law is enforced," he said when speaking at National Party's Lower North Island regional conference on May 17.
According to Minister of Finance Bill English, the measures mean that all non-residents and New Zealanders buying and selling a residential investment property have to provide an IRD number – and non-residents need to have a New Zealand bank account before they can apply for one. As well, non-resident buyers and sellers will also need to hand over a tax identification number from their home country. The government is also investigating a withholding tax for foreign nationals selling property in New Zealand.
The government will also introduce a new test called "bright line", which will work alongside IRD's "intentions" test. For both non-residents and New Zealanders alike, any gains made from a residential property sold within two years of purchase will be taxed, unless you're an owner-occupier.
Prime Minister Key said the government will consult on these changes before they're brought into practice, but they aren't intended to hurt investors with a long-term strategy.
"It's not unreasonable to expect that if you buy an investment property and sell it for a gain within two years, then you should be taxed on that gain," Mr Key said.
"This is quite different to an investor buying with a long-term view of renting their property to tenants."
The policies won't come into affect until October 1, but it's worth having a chat with an Authorised Financial Adviser, like us here at Goodlife, in the mean time. We can work with you to figure out whether the changes will affect your strategy, or have a review to see where your goals stand at the moment.
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