Although New Zealand doesn’t have a comprehensive capital gains tax regime, it has a complex set of tax rules for land transactions. For example, application of the bright-line test can result in the proceeds from the sale to be taxable. These rules ignore the capital and revenue distinction and bring many transactions that might otherwise be considered non-taxable within the tax net.
In a publication in September 2018, Inland Revenue revealed that land transactions continue to be an area of attention, even though several years have passed since the property compliance programme was first set up. Inland Revenue also reports that an additional revenue of $117m was assessed in the 2017/18 year because of audit activities on property compliance issues and over $7m in residential land withholding tax was deducted from properties involving overseas investors.
Considering Inland Revenue’s ongoing scrutiny, taxpayers should endeavour to get their tax obligations correct in respect of any land transactions they entered.