Property Taxation – Land transfer tax forms
On 1st October 2015, a new law was introduced where all parties to transaction that includes a transfer of land or an interest in land have to complete a Land Transfer Tax Statement as part of the registration process.
The only exemption to completing a Land Transfer Tax Statement is if the transfer relates to Maori land as defined by Te Ture Whenua Maori Act 1993, or if the transfer is part of the Treaty of Waitangi settlement process.
The Tax Statement is a one-page form where the transferors (seller) and the transferee (buyer) will need to provide their IRD numbers and Tax residency details. Those who are Tax residents in another jurisdiction will need to provide their IRD number equivalent to that country. For example, if the person is residing in Australia then they need to provide the Australian Tax file number as well as their New Zealand IRD numbers.
The above requirements are contained in both The Land Transfer Tax Amendment Act 2015 and the Tax Administration Amendment Act 2015. The Acts are a precursor to the, now, implemented “bright-line test” (Residential Land Withholding Tax) which will see income tax collected on gains made on properties sold within two years of acquisition, subject to certain exemptions.
Which transactions are exempt from providing their IRD number?
You are exempt from providing information if:
- Land being transferred qualifies as your main home; and
- Main home exemption has not used more than twice in the last two years; and
- Party to the transaction is a natural person; and
- Party to the transaction is not an off shore person.
- If you are disposing of land as a part of mortgagee sale, rating sale under the Local Government (Rating) Act 2002, a Court Order sale or Statute Order sale; or
- If you are acting as a transferor or transferee on behalf the Local Authority; or
- If you are acting as an executor or administrator for a deceased persons estate.
What does this mean for Trusts or a Company?
A Trust or Company is not a natural person; therefore a Trust or a Company cannot be exempt from providing their tax details. When completing the Tax Statement the Trustees of the Trust and the Directors of the Company must complete the Tax Statement in that capacity, meaning that they are to provide the Trusts or Company’s IRD numbers rather than their individual IRD numbers. If the Trust does not have an IRD number the trustee must apply and obtain one before they can register the transaction. Please note that obtaining an IRD for a Trust or Company can take between 8 to 10 working days. Once the Trust or Company has obtained an IRD number, other tax obligations may also apply.
What if you are an offshore person?
An offshore person also needs to obtain an IRD number. Applications for this may take longer than 8 to 10 working days because of the need to open a New Zealand bank account and to meet the Anti-money Laundering and Foreign Account Tax Compliance Act requirements. An offshore person is someone who is:
- A New Zealand citizen who is outside New Zealand and has not been in New Zealand within the last 3 years; or
- A person who holds a resident residenceclass 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; or
- 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.
Can a Trust or Company be an offshore person?
Yes, a Trust or Company can fall under the offshore person category if 25% or more of any trustees, appointers, beneficiaries or directors meet the offshore person criteria listed above.
Is your information confidential?
Information provided by you in Tax Statements will not be made publicly available.
Complying with the tax rules
Failure to comply with the requirements will mean that the Land Transfer cannot be registered. Moreover, filing a false Tax Statement is an offence under the Land Transfer Act 1952 and Tax Administration Act 1994.
It is important to keep up with the property law and tax laws of New Zealand as it keeps evolving and growing because of the current property market. It is important to know the affects and implications the property gain tax rules can have on you. If you think these rules may affect an upcoming property transaction or if you have any queries or questions regarding the new tax rules please contact one of the members of our Business Law or Property Law teams.
What is Residential Land Withholding Tax?
A new Residential Land Withholding Tax (RLWT) has been introduced by the government to improve tax compliance for “offshore persons” selling residential property.
The RLWT is intended to buttress the application of the “bright-line test”, which requires income tax to be paid on any gains from the sale of residential property purchased on or after 1 October 2015 and sold within two years, with some exceptions. The offshore vendor will generally be liable for RLWT and the offshore vendor’s solicitor will be responsible for lodging the RLWT with Inland Revenue.
How much RLWT must be paid?
There are two main calculation methods for RLWT. It is the lesser of:
- 33% (or 28% if the vendor is a company) of the Vendor’s gain; or
- 10% of the vendor’s gross sale price.
How can I apply for exemption?
To be exempt from paying RLWT, you can apply for a Certificate of Exemption, however this will only be available in limited circumstances, such as:
- where property is vendor’s main home; or
- where a residential land developer who has provided an acceptable security to IRD or has met all of their tax obligations in New Zealand for the 2 years before applying.
If the above applies to you or you think you will be eligible for the Certificate of Exemption then contact one of our Business Law or Property Law specialists for further information.