(Clauses 44, 45 and 72)
Summary of proposed amendment
New section RL 1(4) of the Income tax Act 2007 and new sections 54B and 54C of the Tax Administration Act 1994 set out the information requirement in relation to RLWT obligations.
Information to be provided by vendors to paying and withholding agents
New section 54C of the Tax Administration Act 1994 sets out the information that vendors will be required to provide to their paying or withholding agent so that the agent will be able to fulfil any RLWT obligations.
The information requirements in section 54C of the Tax Administration Act 1994 will only apply if the vendor is within the two-year bright-line test. An amendment is proposed to the definition of “bright-line date” in section YA 1, so that the calculation of the two-year period for the purposes of RLWT will be the same as the bright-line test. The bright-line date is defined in new section CB 6A.
The calculation of the two-year period in new section 54C(1) of the Tax Administration Act 1994 will be almost identical to proposed section CB 6A(1) in the bright-line test. The only exception will be that section CB 6A(1)(a)(ii) will not be required in the context of RLWT, as it relates to land outside New Zealand.
In most cases, the start-date of the two-year period will be the date on which the instrument to transfer the land to the person was registered under the Land Transfer Act 1952. This information will be readily available on Landonline to conveyancers, and on Quotable Value’s website.
The end-date will, in most cases, be the date on which the person enters into an agreement for the disposal of the residential land. This date will be available to both the vendor’s and purchaser’s conveyancers.
As a result, the paying or withholding agent should, in most situations, be able to determine, with little involvement from the vendor, whether the vendor is within the two-year bright-line period.
If the paying or withholding agent determines that the vendor is outside the two-year bright-line period, RLWT will not apply and the vendor will not need to provide any further information to the paying or withholding agent.
If the paying or withholding agent determines that the vendor is within the two-year bright-line period, new section 54C of the Tax Administration Act 1994 will require the vendor to give information in relation to the RLWT in the form prescribed by the Commissioner of Inland Revenue. New section 54C(4) will require vendors to provide at the very least their full name, address, IRD number, and whether or not they are an offshore person. If they are an offshore person, the vendor must also state whether they are associated with the purchaser and whether their disposal of the residential land is or would be considered “income” under the bright-line test, ignoring the bright-line test’s main home exception.
New section 54C(3) provides that a vendor’s statement will need to be accompanied by certified copies of relevant and appropriate documents. The Commissioner will prescribe what documents will be acceptable in supporting the person’s statement. For example, a vendor may need to provide a certified copy of their New Zealand passport or residence class visa to support their statement that they are not an offshore person.
If a vendor states that they are an offshore person (and will therefore be subject to RLWT), there should be no need for the vendor to provide evidence to support that statement.
Information to be provided by paying and withholding agents to the Commissioner
New section 54B of the Tax Administration Act 1994 will require paying and withholding agents to provide a statement detailing their RLWT withholding obligations at the time they pay RLWT to the Commissioner.
The Commissioner may also allow further time for paying and withholding agents to furnish their RLWT statements. However, this may affect a vendor’s ability to apply for a refund if he or she wants to file an interim income tax return shortly after the disposal, as refunds will not be issued until the payment of RLWT to the Commissioner is reconciled with the vendor’s account.
Information retention and the Privacy Act 1993
New section 54C(5) of the Tax Administration Act 1994 will require anyone who receives information under section 54C of the Tax Administration Act 1994 to retain that information for at least seven years. This rule will apply to everyone who receives information under this section, irrespective of whether RLWT is ultimately paid.
The provisions of the Privacy Act 1993 will also apply to information collected under section 54C of the Tax Administration Act 1994. Where the recipient of the information is a conveyancing agent, they will also have professional obligations regarding confidentiality.