The Government and IRD made their intentions clear that they intend to continue their focus on the taxation of property transactions. The recently introduced 2 year rule and the newly proposed withholding tax for certain non-residents show that there is an intention to get serious about the collection of tax.

In short, the key changes are as follows:
1. Income tax will be payable on any gains from the disposal of residential land acquired and disposed of within 2 years of acquisition.
2. Residential land will be defined but will exclude land that is used predominantly as a business premises or farm land. It will be ordinary homes.
3. There will be 3 specific exemptions to the rule:

a. The disposal of the main residence of the transferor;
b. Inherited land;
c. The transfer under relationship property agreements.

4. The main home exemption will apply if property has been used predominantly for most of the time that the person has owned the land as their main home. However, there are also rules which pick up when the exemption has been claimed twice in relation to other properties in the previous 2 years, ie you cannot have a regular pattern of buying and selling these.
5. A similar rule will apply to trusts where it is the main home of a beneficiary or settlor.
6. Losses arising from the Bright line test will be ring fenced and only able to be used against similar gains.
7. There will also be some anti-avoidance provisions around transfers of shares in companies.
8. A withholding tax is proposed is relation to certain sales of land by non-residents. This is still at the Bill stage.
9. There has also been increased requirement for non-residents to provide documentary evidence and information enabling them to be tracked to their home country so that the IRD can pursue them for taxation if required.