IRD Cracks Down On Residential Property Investors Who Shirk Tax Rules

By RNZ

Inland Revenue is cracking down on investors in residential properties that they have sold without paying income tax.

The department is matching tax returns with property transactions and is reaching out to those who might be affected and asking tax advisers to do the same.

KPMG’s fiscal partner, Paul McPadden, said the crackdown was not a surprise in the current political, financial and social outcry over the sector, and he expected more.

“Certainly I would expect to see more action on this, there will be an ongoing review of the laws, surveillance from the IRD … I could quite reasonably see the rules change in the future.”

The bright line test requires taxes to be paid on earned gains if a property is sold within two years if purchased between October 2015 and March 2018, or within five years if purchased after the end of March 2018.

McPadden said the family home and inherited property were not subject to the tax, but a vacation home could be, as well as sales to family members or a family trust.

He said the IRD was clearly serious in what was a “direct, planned and coordinated” campaign, with all tax advisers on notice.

His advice to anyone who receives a letter from the IRD or who thinks might be affected was to obtain advice and make a full disclosure to the department.

The IRD has estimated that up to 25 percent of investors may not have paid the corresponding tax.

McPadden said there was no difference in the application of the tax if a person owned one or more properties.

He said that the gains on a transaction were added to an individual’s income and taxed accordingly, and in the unlikely event of a loss that could be deductible.

“The IRD has taken a reasonable approach on the issue, but that does not mean that no sanctions will be imposed if necessary.”

– RNZ