NZ introduces investor capital gains tax for overseas speculators

The New Zealand's government will tighten tax rules on residential property profit taking for investors, including foreigners.

From October 1, gains on 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.

The Finance Minister Bill English said non-resident buyers must have a New Zealand bank account and Inland Revenue tax identification number.

“People calling for a new capital gains tax often overlook the fact that, under existing rules, anyone buying property with the intention of selling for a gain is liable for tax on that gain,” Mr Key told the National Party’s Lower North Island regional conference in Lower Hutt yesterday.

“Everyone – whether from New Zealand or overseas – should pay their fair share of tax according to the law. So we need to ensure the existing law is enforced.”

The changes will be subject to consultation and take effect on 1 October this year.

The “bright line” test will apply to properties bought on or after that date.

“These measures will not affect New Zealanders’ main home, although existing tax rules will still apply in addition to these new steps,” Mr Key was reported as saying on the NBR website.

“They are aimed squarely at ensuring that property buyers – including overseas speculators – who buy residential property with the intention of selling for a gain pay their fair share of tax as required by the law.

“It’s not unreasonable to expect that if you buy an investment property and sell it for a gain within two years, then you should be taxed on that gain.

“This is quite different from an investor buying with a long-term view of renting their property to tenants. And it’s completely different to New Zealand owner-occupiers who have worked hard to buy their family home.”

It is expected to take some of the heat out of Auckland's housing market and sit alongside the Reserve Bank of New Zealand who will require residential property investors in Auckland to place a minimum deposit of 30% to qualify for a mortgage effective October 1.

Auckland house prices jumped 16.9% annually compared to 3.2% in the rest of the country, posing a risk to financial stability, the RBNZ said.