Tax crackdown begins on New Zealand housing speculators

Tax measures to discourage speculators in New Zealand's overheating housing market took effect Thursday but critics said they will do little to cool prices.

The new "bright-line test" means that any domestic property bought and sold within two years apart from the owner's main home, inherited property and property in relationship settlements will incur income tax on gains.

It strengthens the previous requirement for the tax authorities to prove the property owner had an "intention" to make a gain from a sale, which was widely derided as being impossible to enforce, but still applies to properties sold after two years.

Revenue Minister Todd McClay said Thursday the bright-line test would help to ensure that people paid their fair share of tax on gains from property sales.

"The bright-line test makes it clear that all property buyers, including overseas buyers, who buy and sell a residential property within two years, will be taxed on their gains," McClay said in a statement.

The test was implemented with other measures, including requiring all buyers and sellers to have a New Zealand tax number and New Zealand bank accounts.

The main opposition Labor Party said the test was likely to be easily avoided by speculators.

"Tax and legal experts have slammed the bright line test as 'a bad idea,' 'incoherent' and 'ineffective,' leaving one ' professionally confused'," Labor finance spokesperson Grant Robertson said in a statement.

Last week, Reserve Bank of New Zealand (RBNZ) governor Graeme Wheeler reiterated his concern about the risks to national financial stability of soaring house prices in the country's biggest city of Auckland, home to a third of the population.

"We remain concerned about the financial stability risks and risks to the broader economy that would be associated with a major correction in Auckland house prices," he said in the RBNZ Annual Report. Endi