Housing speculators face tougher New Zealand tax regime

The New Zealand government on Thursday officially closed a loophole that allows domestic and overseas speculators to cash in on house sales without paying tax.

Parliament on Thursday passed the Taxation (Land Information and Offshore Persons Information) Bill to enable the government's Land Information New Zealand agency to collect information when property is bought and sold, and pass this information to the Inland Revenue Department (IRD).

Under the legislation, buyers and sellers must provide IRD tax numbers and other details when transferring property other than their main home, Revenue Minister Todd McClay said in a statement.

The main home exemption would not apply to offshore persons or trusts.

"Those who are tax resident elsewhere must provide their IRD number from that country and offshore persons need a working New Zealand bank account to get a New Zealand IRD number," said McClay.

The requirements applied to contracts entered from Oct. 1 and from April 1 next year, all additional information must be provided regardless of when the contract was entered into.

"Most people do the right thing and pay their taxes, but there has been some concern that compliance with taxes on certain property transactions, particularly by non-residents, may be relatively low," Land Information Minister Louise Upston said in the statement.

The new law was introduced in response to the country's housing crisis and soaring prices, particularly in the biggest city of Auckland, which the Reserve Bank of New Zealand says pose a risk to financial stability.

Critics have claimed that speculators from home and abroad are driving up property prices, but the government has rejected calls to set up a property register to gauge the extent of the problem. Endi