New property tax rules in use

  • 01/10/2015
New property tax rules have been introduced (File)
New property tax rules have been introduced (File)

New rules are in force which mean income tax has to be paid on gains made from houses bought and sold within two years.

Thursday is the start date for the government's "bright line test" - one of its measures to curb residential property speculation, particularly in Auckland.

Tax law itself hasn't changed, it's the way the test is applied.

Until now, Inland Revenue had to determine that a house sold within two years was bought with the intention of selling it.

That was difficult to enforce, so it's been changed to a simple rule covering purchases and sales within two years unless the properties fall into exemption categories.

The exemptions are a person's main home - the one they normally live in - and inherited properties.

Houses under a relationship agreement are also exempt.

The bill enacting the new rule is still to be passed by parliament.

Labour says it's a half-measure and its effectiveness won't be known for two years, which will be after the next election.

Its MPs say all it means is that speculators will wait two years and one day before they sell a property.

The Greens want it extended to five years.

"That would capture more of the damaging property speculation that has been driving house prices up in Auckland and elsewhere to unaffordable levels," said Julie Anne Genter.

"Reserve Bank mortgage lending data for the year to August shows the extent of New Zealand's housing speculation problem - 45 percent of all mortgage lending going to property investors compared to just 12 per cent going to first home buyers."

NZN