Withholding tax will work better than chasing it from house flippers, PM says.
Rob Hosking gives his analysis of what to watch out for this week in politics and economics on NBR Radio and on demand on MyNBR Radio.
The onus will be on non-resident property sellers to claim tax back under new rules previewed yesterday, Prime Minister John Key said this morning.
The new regime, which will form part of Thursday's budget, will require foreign home buyers or New Zealanders living offshore to have a New Zealand bank account and an IRD number and tax gains if a property is sold within two years, unless it is the buyer's main home, inherited or transferred in a relationship settlement.
"Basically if you’re a non-resident, we’re going to get good information on you and you will have to pay the tax because we’re going to withhold the tax when you sell the property. And you’re going to have to come and get it from us as opposed to what we do at the moment – which is try and get it off them, which we never can," Mr Key said on Breakfast this morning.
Asked if the new focus on property tax was a u-turn, the PM said, "Supply is the biggest issue. I don’t think what we announced yesterday is going to come anywhere near to fixing the supply side."
It was not a crisis "but prices are rising more than we would like."
Asked if housing affordability in Auckland had reached a crisis point, Mr Key said, "I don’t agree with that. House prices are rising faster than we would like. But, if you go to Sydney or Melbourne, any major capital in the world and pick up a paper, you’re going to find house prices rising as fast or faster.
"But what we announced yesterday does help because we know people are rorting the system because in Budget 2010 we gave IRD $33 million more to hire inspectors. They’ve raised $250 million from people rorting the system.
"So, all we’re saying is, if you buy and sell an investment property in two years, you can try and claim you were renting it but in reality you were there to make money. So that’s very clear now."
On whether the tax rule tightening could reduce supply by taking investors out of the market, Mr Key said, "Genuine investors will still buy property without doubt. But if your intention was to buy and sell quickly, then actually if you rort the system and don’t pay tax, you will be caught. That will free up some supply for more genuine buyers."
