15 Jul 2015

Kinks in plan to tax gains on properties

6:13 pm on 15 July 2015

Property investors, accountants and lawyers have concerns about the Government's plan to tax gains on some properties.

An image of houses among trees on a hill.

Photo: RNZ / Diego Opatowski

The Government wants to tax any gains made on properties that are bought and sold within two years unless it's the family, or main home.

The proposed laws will also require all investors, including those from overseas, to have an IRD number and a New Zealand bank account before they can buy property.

Tax team leader for Chartered Accountants Australia and New Zealand, Peter Vial, told a parliamentary select committee today that the law needed to clearly define what a 'main home' is.

"There will be uncertainty as to how it applies, many people have more than one main home in today's world, so spouses - one is working in Christchurch, one is living in Auckland. There will be some big questions about how that main home exemption applies."

Peter Vial said his organisation supported the intent of the legislation.

Investors have say

Property investors say the Government's proposal should be halved to just one year.

The Property Investors Federation told the select committee the two-year period would capture too many genuine investors.

Its chief executive, Andrew King, said a period of one year would capture property speculators without penalising genuine investors who wanted to rent the property out.

"The traders and speculators don't want to have a tenant. They want to tick that property over as fast as they possibly can," he said.

"The holding costs of not selling the property are high and that reduces their profitability. So most - I would say all - traders and speculators would be caught within that year."

Mr King said the federation supported another measure in the bill requiring all foreign property buyers to have an IRD number and a New Zealand bank account.

He said that would help answer the question of whether foreign property investors were a major problem.

What are the proposed changes?

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