The Inland Revenue Department is proposing changes to ‘tainting’ rules that will mean investors who both hold property long term and engage in trading will be taxed on any sales.
Tuesday, April 10th 2007, 2:13PM
by The Landlord
The paper entitled Reforming the definitions of associated persons and released last month was prepared in conjunction with Treasury.
It examines the definitions of associated persons in the Income Tax Act 2004 says: “the associated persons definition which applies for land sales contains some major loopholes which allow land dealers, developers and builders to escape tax by operating through closely connected entities”.
Accountant and member of the Auckland Property Investors’ Association Garth Melville says, “This is a huge change against the property sector”.
“In essence these proposed changes to the definition of ‘associated persons’ in the Income Tax Act will mean that certain persons that carry on a tainted activity (for example land developers, land traders, builders etc) will be unable to dispose of most investment land (‘buy and holds’) without paying income tax on any gain on sale.”
