Land Transfer Tax statements – what you need to know

Most of us don’t buy new homes or land very often, so our clients are still sometimes surprised that they now have to complete a Land Transfer Tax Statement – and that they have to do it before settlement.

Leaving it to the last minute isn’t helpful, particularly if it’s a trust or company buying or selling the property and you suddenly need an IRD number.

So here’s some information to help you get everything lined up in plenty of time for your settlement.

The Land Transfer Tax statement
Since October 2015 when the new rule came in, a Land Transfer Tax statement has been required for the majority of sales and purchases of land.

The only exceptions to completing a statement are if the transfer relates to Māori Land (as defined in Te Ture Whenua Māori Act 1993), or if the transfer is part of a Treaty of Waitangi settlement process.

Everyone else has to fill in the form. Whether you have to provide your full tax details on the form, though, depends on whether an exemption applies.

Exemptions from providing tax details
Some people and entities that are buying or selling land have to provide their New Zealand IRD number as well as their tax number for any other country of which they’re a tax resident.

One common exemption from having to provide tax details for a transfer of land is the main home exemption. You can only claim this exemption if you fit all four of the following criteria:

  • The transfer involves the house in which you mainly live. If you have more than one home, your main home is the house with which you have the greatest connection.
  • You haven’t used the main home exemption more than twice in the last two years.
  • You are buying or selling the house as an individual (not for instance through a trust or a company).
  • You are not an offshore person.

There are also exemptions in the following situations:

  • You are buying or selling land in your capacity as executor or administrator of a deceased person’s estate.
  • The transfer is part of an enforced sale: that is, a mortgagee sale, rating sale under the Local Government (Rating) Act 2002 or a court ordered sale or a statute ordered sale.
  • You are buying or selling for tax exempt public authorities or local authorities (as defined in the Income Tax Act 2007).

It’s usually fairly obvious if the main home exemption will apply to sale or purchase by a private individual. What tends to catch people out is that the main home exemption can’t apply if you’re buying or selling land not as an individual but as a trustee of a trust (such as a family trust) or as a director of a company.

Unless one of the other exemptions applies, the trust or company will need to fill in the relevant tax details.
It’s also important to note that the IRD number (and tax number for any other country, if applicable) for a company or trust needs to be the trust or company’s own tax number – not the trustees’ or directors’ personal IRD numbers. If a company is acting as a trustee of a trust, the IRD number required is one for the trust.

This often means that the trust or company will need to apply to Inland Revenue to get a new IRD number. This is particularly common for non-income generating family trusts, because these often haven’t been set up with IRD numbers.

It takes time to get a new IRD number, so it’s important to let us know as soon as possible if you’re going to need to provide tax details and you don’t yet have one. You can either apply for the new number yourself or we can do it for you. It tends to be a lot quicker to go through us, but we don’t have a magic wand so it’s good if we have plenty of notice.  That way you’ll be all set to go on settlement day.

If you have any questions about Land Transfer Tax Statements or the exemptions, don’t hesitate to ask us – we are always happy to help.