If you are a property investor or offshore owner of residential property in New Zealand, you may be caught by the new Residential Land Withholding Tax (RLWT) rules if you are looking to sell within two years of purchase. New rules came into force on 1 July 2016 that require RLWT to be collected on certain property sales.
Traditionally, if a property has been bought and sold with the intention of making a profit, that profit has always been taxable. It has been difficult for Inland Revenue to collect tax from the proceeds of such sales from offshore owners in the past. The RLWT regime is a way around this, ensuring the RLWT is collected at the point of sale.
If you’re selling property with the intention of making a profit, look before you leap. Key points to consider are:
- Was the property acquired on or after1 October 2015?
- If yes, the property may be caught.
- Current ownership for less than two years?
- The RLWT only applies to properties owned for less than two years.
- Is the property “residential land”?
- RLWT only applies to residential land sales.
- Is the vendor an “offshore person”?
- This includes New Zealand citizens who have been out of New Zealand for the last three years or more.
RLWT is deducted upon completion of the sale, usually by the lawyer or licenced conveyancer.
The amountof RLWT to be collected will be either, the sale price x 10% or the profit made on the property x the RLWT rate, whichever is lower.
Note, the RLWT does not take priority over any mortgage repayments or rates owed on the property.
For further information, talk to your lawyer or accountant.