Residential Land to be “Sensitive Land”…
Following on from their promise to ease Auckland’s property market crisis by restricting non-residents from buying NZ residential land, the Overseas Investment Amendment Bill (5-1) was introduced by Government in December 2017, which if passed, will implement their policy to bring residential land within the category of sensitive land for the purposes of the Overseas Investment Act 2005.
The new rules will prevent overseas persons not ordinarily resident in NZ (a defined term), from being able to buy existing houses and other pieces of residential land.
Land affected by the changes will be that classified as either “residential” or “lifestyle” for rating valuation purposes under the Ratting Valuations Rules, which are issued by the Valuer-General.
Exemptions (with appropriate conditions attached) from the restrictions may apply where the overseas person:
will be developing the land and adding to NZ’s housing supply
converts the land to another use, demonstrating wider benefits to the country, or
has an appropriate visa status, showing they have committed to reside in NZ(regulated criteria).
NZ & Australian citizens will be exempt from the proposed changes.
Considering the lack of reliable statistics surrounding exactly who is buying NZ land, only time will tell whether the purchase restrictions will have any meaningful impact on the NZ residential property market. I suspect the likely answer is, “where there is a will, there’s always a way”.
Save the Date…
Make sure you keep your calendars free for a special date with the Hon Grant Robertson on Thursday 17th May 2017, at which time he will deliver Budget 2018.
Expect to see a focus on progressing a number of Government’s well publicised priorities, including:
- building quality public services for all NZ’s and improving access to core services, such as health and education
- taking action on child poverty and homelessness
- supporting families to get ahead and sharing the wealth generated by the economy with a wide range of NZ’s
- sustainable economic development and supporting the regions, and
- managing NZ’s natural resources and taking action against environmental challenges, such as climate change.
Extension to Bright-Line period in the wings…
A Supplementary Order Paper has been added to the existing Taxation (Annual Rates for 2017-18, Employment and Investment Income, and Remedial Matters) Bill, which is presently progressing through Parliament and is expected to be enacted next month. The SOP will increase the existing two year bright-line period to five years, applying to applicable residential land purchased post the date of Royal Assent.
Other than extending the time period, no other changes are proposed to the existing bright-line rules, and like the opening article on amendments to the “sensitive land” definition, the basis promoted by the Government for extending the requisite ownership period to five years, is an effort to improve housing affordability, in this case by taking speculators out of the market. Once again, time will tell how effective the strategy is, particularly if you consider a number of overseas taxing jurisdictions who have full capital gains tax regimes, yet still experience overheated property markets.
The amendment also has consequent effects on the residential land withholding tax rules, so amendments are being made as appropriate to ensure these provisions deal with the extended bright-line period.
Final point to note – do not forget that the bright-line rules apply to residential land (as defined) owned anywhere in the world, not just NZ.
Richard Ashby BBus, CA, CPA PARTNER
Em: [email protected]
Ph: +64 9 365 5532
Fx: +64 9 309 5260
Mb: +64 21 823 464
