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Inland Revenue

Tax Policy

PUBLISHED 9 December 2015

Tax bill passes first reading

A tax bill introduced last month passed its first reading in the House last night. The bill contains a proposed withholding tax on gains from property sales within two years by offshore sellers, an amendment to the GST rules to improve the collection of GST on services and intangibles purchased online and a proposed information exchange with Australia to improve collection of student loan repayments amongst loan borrowers living there. For more information see the media statement.

Hon Todd McClay
Minister of Revenue

8 December 2015

Media statement

Tax bill tackles offshore property speculators and online GST

A bill that will see offshore property speculators pay a withholding tax on profits from property transactions under the ‘Bright-line test’, and GST applied to online purchases of services and intangibles from overseas suppliers has passed its first reading.

Revenue Minister Todd McClay says the Residential Land Withholding Tax (RLWT), GST on Online Services, and Student Loans Bill is about fairness.

The bill proposes a new withholding tax on sales of residential property by people who live overseas and go on to sell the property within two years of purchase.

The proposed measure is the third part of the Government’s investment property tax reforms announced as part of Budget 2015.

“This measure will act as a collection mechanism for the new bright-line test, which applies to gains from the sale of residential property purchased on or after 1 October 2015 and sold within two years.

“This will bring the collection of bright-line tax into line with other withholding taxes, which are applied when there is likely to be a tax owed and collection could be difficult,” says Mr McClay.

RLWT will apply when the property being sold is located in New Zealand and defined as “residential land” under the bright-line test provisions, the seller is an offshore person, bought the property on or after 1 October 2015, and has owned the property for less than two years before selling it.

“The other major part of the bill is about creating a level playing field for collecting GST and putting New Zealand businesses and jobs ahead of the interests of overseas suppliers”, says Mr McClay.

“The Government needs to deal with increasing volumes of online services and other intangibles purchased from overseas suppliers that should, under New Zealand’s tax rules, be subject to GST, which should apply to all consumption that occurs in New Zealand.

“This is an increasing challenge because of its exponential growth. The Government is losing revenue and it has created an unfair playing field for New Zealand retailers.

Mr McClay says the proposed measures will apply GST to cross-border “remote” services and intangibles supplied by offshore suppliers (including e-books, music, videos, and software purchased from offshore websites) to New Zealand-resident consumers, by requiring the offshore supplier to register and return GST on these supplies.

“To reduce compliance costs, offshore suppliers will not be required to return GST on supplies to New Zealand-registered businesses, nor will they be required to provide tax invoices.”

Non-resident suppliers will be required to register and return GST when their supplies of remote services to New Zealand residents exceed NZ$60,000 in a 12 month period.

The proposed new rules for online GST would come into force on 1 October 2016, following enactment of the bill. The RLWT rules are effective 1 July 2016.

Media contact: Lesley Hamilton 027 490 1345