Property purchased from 1 October 2015 will be subject to tax if sold within two years with the exception of the family home, inherited or relationship property.
The pre existing ‘intention rule’ will continue to apply to property after the two year time frame ensuring income tax is payable on profits from property sales. Both the bright line test and the pre-existing intention rule are subject to the seller’s normal tax rate.
“A withholding tax collection mechanism for the bright-line test to apply to offshore sellers will be introduced as part of a wider tax bill soon. “
Chinese buyers are still interested in residential property particularly in Auckland. The mid market and lower priced properties are in demand while the high end sector has fallen off their radar.
There will be continued interest in NZ residential property from offshore chinese buyers however it may fluctuate depending on confidence in China’s financial stability.
A stronger yuan may also push Chinese investors towards New Zealand.
The bright line rule when applied to a boarder tax bill will even up the playing field for onshore and offshore investors.
For local investors trading property like PropertyTutors clients the bright line rule is like ‘water off a duck’s back’ as they have been subject to the ‘intention rule’ and pay the tax as required.