KEY POINTS:
Inland Revenue is on the hunt for landlords not paying tax on their rental properties, accusing them of cheating the system by at least $100 million annually.
In a major crackdown which sparked the tax hunters to mount a major campaign in the past six months, Inland Revenue staff have begun to target real estate agents and conveyancing lawyers to find out which of their clients owes money.
An Inland Revenue spokesman said last week: "From past work we have done in this area, we estimate that the loss of revenue from undeclared property income is more than $100 million a year - revenue that should benefit all New Zealanders.
"We have been working with various groups such as real estate agents and conveyancing lawyers, as we realise that many people go to them for advice when purchasing a property. Since October our advisory staff have made more than 700 visits to groups such as these," the Wellington spokesman said.
Inland Revenue this week issued a 24-page guide to the tax laws for landlords, using money allocated from the Budget to launch a national education campaign.
"We're concerned that people don't understand that if they buy a property with the firm intention of selling it to make a gain from the increase in its value when prices rise, then any profits are taxable.
"We believe this isn't well understood and that people are mistakenly understating their income," the spokesman said.
But behind the scenes, Inland Revenue has been far more aggressive, mounting a crackdown on landlords in Auckland, Wanaka and Queenstown three years ago and netting $106 million during an 18-month phase, including more than $50 million from Auckland wheeler-dealers.
But a landlord spokesman said his members were not the villains.
Andrew King, vice-president of the New Zealand Property Investors' Federation, said landlords were not the ones evading tax but speculators and active property traders were.
Federation members were well aware of their tax obligations, he said, and paid tax on their rental income. Opportunists were to blame and they weren't members.
"Most of our members are buying and holding," King said.
National Business Review also reported on Friday that a High Court judge had ordered a director of chartered accountants Ernst & Young to give Inland Revenue the names of clients advised about certain tax avoidance schemes.
The ruling by Justice Rod Hansen in the High Court at Auckland is bound to send a shiver down the spine of a large number of clients, National Business Review said.
Inland Revenue assurance manager Richard Philp said the department's website had been expanded to include specific property tax information, a self-assessment questionnaire, case studies and an online version of the booklet.
"We are providing people with information to ensure they are aware of their taxation obligations relating to residential property," he said.
"All this information is there to help people who are buying and selling property decide if they should be paying tax," Philp said.
TAKE THE TEST
Landlords must be able to answer:
* Why did you buy the property?
* Did you plan to make money?
* Did you pay tax on any cash gain?
* Did you buy expecting prices to rise?
* Did you know your profit is taxable?
* For more information go to www.ird.govt.nz/toii/property/property-index.html
