IRD potentially misleading over off-the-plan property sales
An Inland Revenue brochure issued on off-the-plan property sales contains potentially misleading advice, says the New Zealand Institute of Chartered Accountants (NZICA).
Wednesday, December 2nd 2009, 11:37AM
by Jenha White
The brochure states that the IRD will presume an intention of sale for all property sold prior to a contract going unconditional.
NZICA tax director Craig Macalister says this means that if a person made a deposit on a property with the intention to live in that property, but subsequently had a change of circumstances and decided to sell it before the contract went unconditional, then any gain made on that transaction would be taxable.
"The Institute is concerned that it is unlikely Parliament ever intended such transactions to be taxable.
Furthermore the IRD view is not based on settled law. Rather, it is a fine point of law that has been pursued by Inland Revenue in some recent cases."
Macalister says the brochure is also confusing in whether it is always referring to property sold before a contract becomes unconditional or after the contract becomes unconditional - different outcomes can arise in these circumstances.
"We have received complaints from chartered accountants in public practice as to the correctness of the brochure."
IRD Assurance group manager Martin Scott says he does not agree that the brochure is misleading.
"The IRD wants to make sure people understand whether or not their profits from off-the-plan property sales are taxable.
It is primarily aimed at helping individuals to decide if they need to seek further information or professional advice."
He says the IRD has advised people that if they think the rules described in the brochure may apply to them, then they should talk to their tax advisor.
The IRD is looking into property tax as part of its Property Compliance Programme.
Macalister says the NZICA supports Inland Revenue in following up on land transactions that were undertaken for the purposes of making a gain and it supports Inland Revenue in its efforts to inform people of their obligations in those circumstances.
"However, trying to encourage people with inherently private transactions to pay tax on any gain (when property is purchased off a plan and before possession is taken) is taking matters a little too far. This is especially so when we are not dealing with settled law, and when it would seem contrary to the policy underpinning the land tax rules."
The NZICA says the public needs to be aware that the advice contained in the Inland Revenue brochure (IR 368) should not be taken at face value.
"We strongly endorse the recommendation in the brochure that people should obtain tax advice from a professional," said Mr Macalister.
The IRD says it has met with the NZICA to discuss these issues and it will continue to listen to their views as it always does around such issues.
Jenha is a TPL staff reporter. jenha@tarawera.co.nz
| « Will Ha have the last laugh? | Free Investment Property Showcase Events: Auckland, Wellington and Christchurch » |
Special Offers
Commenting is closed
|
|
Printable version |
|
Email to a friend |
