New bright line test for capital gains on housing

John Key announced:

“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 today.

Mr Key confirmed the Budget this week will contain several measures to bolster tax rules on property transactions and to help Inland Revenue enforce them.

Introducing 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.

This isn’t a major change, but a useful one. Intentions are very hard to prove, so a bright line test will make enforcement easier. It is hard to think of many times that you’d sell a secondary home within two years of buying it, unless it is to make a capital gain.

Requiring non-residents and New Zealanders buying and selling any property other than their main home to provide a New Zealand IRD number.

This may also give us some better data on what proportion of houses are foreign owned, plus of course allow any gains by non-residents to be taxed,