IRD to clamp down on speculators

Finance Minister Bill English. Photo / NZME.

Finance Minister rejects Reserve Bank’s calls to remove tax incentives available for investment properties.

The Government has proposed giving the taxman more resources to crack down on residential property speculators - a move which has been welcomed by a lobby group for housing investors.

Finance Minister Bill English yesterday rejected calls by the Reserve Bank to remove tax incentives for investment housing, which the bank has blamed for rising house prices in Auckland. But he said there was an ongoing discussion about whether the Inland Revenue Department could be doing more to enforce existing rules on property trading.

Mr English said there was already a tax in place for people who bought property with the aim of reselling it.

And with real estate agents and buyers reporting high levels of trading activity in Auckland, "there is a question of whether that should give rise to further enforcement activity".

Any potential changes to the IRD's resources would be announced as part of the Budget on May 15.

NZ Property Investors' Federation executive officer Andrew King said he supported giving the IRD more resources to target speculators because the existing compliance regime had been highly successful.

He said it was important to note that the IRD was targeting speculators and traders, not investors who supplied long-term rental properties.

Mr King said the public would have more confidence in a well-funded tax scheme which targeted traders instead of a broader capital gains tax, which would lead to increased costs for businesses and higher rents.

At present, speculators have to declare that they are buying a house with the intention of reselling it. They are then taxed on the sale.

The IRD scrutinises property transaction records to make sure people are complying with this rule. In particular, it looks at how quickly a house is sold and the number of houses a person is selling.

Figures released by the IRD showed that $52.4 million was collected in 2013/2014 from speculators or traders - either from one-off speculative transactions or patterns of dealing. This figure is expected to increase in 2014/15. The IRD has already collected $63.2 million.

Mr English said yesterday two tax reviews had shown they would make little difference and elections had shown they had little public support.

"I think the lesson, particularly out of the last election campaign, is that the public do need to support changes in taxation of housing because it is, for by far the majority of New Zealanders, their main asset, and for many of them, a significant investment asset."