One in four real estate speculators dodges the housing tax

Speculators are making millions in our overheated housing market, but as many as one in four failed to pay the property tax owed on the property that flipped last year, IRD figures reveal.

Of the 1701 property sales subject to the bright line test in 2019, a form of capital gains tax, only 1,285 have paid.

That’s a compliance rate of just 75 percent, which means that one in four speculators who are taxed have not yet paid.

New Zealand has almost no tax on money generated from property sales. The John Key government created the “bright line test,” which was a kind of capital gains tax. It meant that, in most cases, if an investment property was bought and sold within two years, the money made from that sale would be taxed.

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Last term, Labor extended that test to five years.

The bright line test is notorious for non-compliance. The IRD warned the current government when it extended the threshold from two to five years that up to half of the tax applied was not being paid voluntarily, which means that the IRD would have to go after them to make them pay.

Finance Minister David Parker said the IRD was working to make sure people paid the tax.

“There is a time lag between the properties that are sold and the clear-line information that is included on a tax return,” Parker said.

“Inland Revenue is working with clients to encourage them to comply. We hope, given the work IR is doing, that reporting and compliance will improve over time.

“Regarding compliance in 2019, Inland Revenue is already addressing those compliance issues,” Parker said.

Inland Revenue is also looking at 3,758 sales where the bright line test could be applied, meaning the 75 percent figure could go up. He says he is working through accumulation.

“Inland Revenue is currently following up with clients on the balance of these transactions through the involvement of our community compliance officers along with any required audit activities to ensure that these clients are meeting their obligations under the rules. bright line.

“We are currently about a quarter of the way through these cases,” a spokesman said.

The government is struggling to contain the rampant growth in house prices since the shutdown. He is currently embroiled in a debate with the National Party over whether it should curb the Reserve Bank, which has promised to print money to encourage more bank loans, something that could further increase house prices.

Westpac economists are forecasting home price increases of up to 15 percent next year.

Prime Minister Jacinda Ardern does not want to use the Reserve Bank to cool the housing market. Instead, he suggested that the government could do something to help first-time home buyers overcome the deposit threshold.

Ardern has cited the extension of the bright line test as something the government had done to fix a bankrupt housing market.