Rush on property to beat tax 'misguided' - Key
Anyone looking to buy up property in Auckland before changes are made to tax rules might be in for a bit of a shock, Prime Minister John Key says.
A letter sent out from Onehunga-based Barfoot & Thompson agent Kevin Liu says some investors are rushing into the market before changes to property law in October.
From then, the Government will begin to collect data which will reveal who is buying New Zealand houses, and where they live.
It requires non-residents and New Zealanders selling any property other than their main home to provide an IRD number, and a New Zealand bank account.
A new 'bright line' test to tax gains from residential property sold within two years of purchase, unless it's the seller's main home, inherited or transferred in a relationship property settlement will also be introduced.
Mr Liu's letter notes an "upward spike in demand" as some groups of buyers try to get into the market before the changes come into force. He says properties in his area are selling for "premium prices".
But Prime Minister John Key says if that's true, those people are in for a surprise.
"It's really important for taxpayers to understand the bright line test takes away ambiguity when it comes to purchasing investment properties for that two year period. It doesn't fundamentally change the law per se; it's an intent-based test.
"For instance if you bought a property today and it was an intent-based property that will be on the radar screen of IRD. If people think they're going to beat the rules by buying today before the bright line test comes in they might be in for an awfully nasty shock when they get a knock on the door from an IRD tax inspector," he said at his post-Cabinet press conference yesterday.
Anyone who believes they've found a loophole in the changes probably doesn't know the existing legislation well enough, he said.
"Some people would be misguided in thinking that's one-way bet. There were also people when the dairy payout was $8.40 who said it would go up forever and never go down. Markets go up and markets come down."
The Government was still working through exactly the kinds of information which will be collected as a result of the change and how and when it will be released publicly.
The data will be "perfect" insofar as it will show the exact number of non-resident taxpayers, but could be skewed in some geographic areas such as the UK and Australia where Kiwis are more prevalent.
"In a place like China, there's a hell of a lot less of New Zealanders which live in china. We would look at non-resident tax data out of China and be able to make an assessment and say a vast bulk probably would not be New Zealander's living overseas."
Better information about how much of an influence foreign property buyers are in the Auckland housing market is good for the debate, however it was just a "snapshot in time", Mr Key said.