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Property taxation legislation

New requirements from 1 October 2015

Also known as the ‘Bright-line regime’, the new property taxation regime comprises: 

Bright-line Taxation Q&As

Residential Land Withholding Tax (RLWT) Q&As

What’s changed?

Since 1 October 2015, transferors and transferees of property have been required to complete a Land Transfer Tax Statement in order to complete settlement. These provisions did not apply to Agreements for Sale and Purchase that were entered into prior to 1 October 2015 as long as the transfer was registered prior to 1 April 2016. After 1 April 2016 these provisions applied to all transactions.

The only exception to completing a Land Transfer Tax Statement is if the transfer relates to Māori Land as defined by Te Ture Whenua Māori Act 1993, or if the transfer is part of the Treaty of Waitangi settlement process.

Transferors and transferees need to provide their IRD number to LINZ unless an exemption applies (exemptions are listed below). Those who are a tax resident in another jurisdiction need to provide their IRD number equivalent for that country (e.g Australian Tax File Number) as well as their New Zealand IRD number.

Which transactions are exempt from providing their IRD number?

There is an exemption for the ‘main home’, if the following criteria are met:

  • the transfer involves the main home; and
  • the main home exemption has not been used more than twice in the last two years; and
  • the party to the transaction is a natural person; and
  • the party to the transaction is a not an offshore person.

The following transfers are also exempt from providing tax information:

  • a transfer as part of a mortgagee sale, rating sale under the Local Government (Rating) Act 2002, a court ordered sale or a statute ordered sale;
  • you are acting as transferor or transferee for tax exempt public authorities or local authorities as defined in the Income Tax Act 2007; or
  • you are acting as executor or administrator in the administration and distribution of a deceased person’s estate.

What do property lawyers and their clients need to do?

The Property Law Section strongly advises practitioners to notify clients affected by this regime and encourage them to take the necessary steps to obtain an IRD number if they do not already have one.

If your client is an ‘offshore person’ they will require a New Zealand Bank account number in order to obtain an IRD number.

All trusts need their own IRD numbers, whether transferor or transferee. This includes non-income generating ‘passive trusts’ that own the main home, regardless of who is in occupation. IRD have advised that their processing time for IRD number applications is 8-10 working days. Please note that this does not include postage times.

Resident IRD applications are to be posted to IRD. However, non-resident (offshore persons’) IRD number applications can be emailed to IRD at:

Non-resident (offshore persons’) applications may take longer because of the need to open a New Zealand bank account and meet anti-money laundering and Foreign Account Tax Compliance Act Requirements.

Key terms

Main home – means the one dwelling that is mainly used as a residence; and with which the person has the greatest connection (if they have more than one home).

Greatest connection – consider how much time the person spends at the dwelling, whether their personal property is in the dwelling, where their social ties are strongest, and whether the person has employment, business interests and economic ties to the area where the dwelling is located.

Offshore person

For an individual:

  • A New Zealand citizen who is outside New Zealand and has not been in New Zealand within the last three years.
  • A person who holds a resident class visa granted under the Immigration Act 2009, and who is outside New Zealand and has not been in New Zealand within the last 12 months.
  • A person who is not a New Zealand citizen and who does not hold a resident residence class visa granted under the Immigration Act 2009.

For a body corporate or an unincorporated body of persons, including a trust or a unit trust, a person who would be an overseas person under section 7(2)(b) to (e) of the Overseas Investment Act 2005, treating references to an overseas person or persons in that section as including a person or persons described in the previous paragraph.

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Last updated on the 1st December 2018