New Capital Gains Rules Slammed in New Zealand

September 24, 2015 Taxation in New Zealand

WELLINGTON – New rules in New Zealand targeting property speculators are more likely to hit people faced with unforeseen personal circumstances then their actual target.

New Zealand’s proposed rules on the taxation of gains made from the sale of property will not have the intended effect, and will simply shift investor behaviour, instead of discouraging speculative investment, according to statements made by the New Zealand Law Society and the Chartered Accountants Australia and New Zealand to the Parliament’s Finance and Expenditure Committee, who are reviewing the rules before they can be implemented.

The new rules have been called the “bright line” test, which states that any capital gains made from the sale of property within two years of the initial purchase should be levied with income tax at the top marginal rate of the seller.

However, experts are now arguing that the rules will encourage serial investors and property speculators to delay the sale of the property until outside of the timeframe, but, ultimately, will not stop them from entering and making profit on property investment.

It was also noted that the rules are likely to affect individuals who were not initially intended to be targeted, such as low-scale investors who are holding property as a long-term investment, but are forced to sell due to unforeseen personal circumstances.

The government currently estimates that barring any unforeseen delays the new rules will be implemented from October this year, and will raise NZD 5 million per annum.

Photo By: Vašek Vinklát