New property tax would hit offshore sellers

Public consultation on a proposed residential land withholding tax, which would only apply to overseas sellers, has officially opened.

Revenue Minister Todd McClay says the proposal forms an important part of the larger plan to ensure the right amount of tax is paid under the Bright-line test.

He says it is difficult to collect tax from people speculating on property in New Zealand if the seller lives overseas.

“For this reason we are proposing that a portion of the sales proceeds are withheld at the time of sale and paid to Inland Revenue as a pre-payment or bond against any tax that may be due,” he says.

Last week, the Government introduced a Bill which would make sure people who buy and sell property pay tax on the gain under certain circumstances.

Any gain from residential property sold within two years of purchase will be taxed, unless it is the seller’s main home, inherited from a deceased estate or transferred as part of a relationship property settlement.