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Maarten Holl / Things
Inland Revenue has estimated that up to 25 percent of investors may not have paid the appropriate tax.
This story was originally published on RNZ.co.nz and republished with permission.
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 could 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.
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“Certainly I would expect to see more action in this regard, there will be a continuous evaluation of the laws, surveillance from the IRD … it is quite reasonable that you can see the rules change in the future.
The bright line test requires taxes to be paid on earned profits 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 that 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 the tax advisers on notice.
His advice to anyone who receives a letter from the IRD or thinks might be affected was to get advice and make a full disclosure to the IRD.
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 whether a person owned just one or many properties.
He said that the gains on a transaction were added to a person’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.”
This story was originally published on RNZ.co.nz and republished with permission.
