PHOTO: FILE
New Zealand’s Inland Revenue (IR) has uncovered over $150 million in unpaid tax from the property sector in just the first nine months of the current financial year – with property developers and investors at the centre of the shortfall.
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The discovery includes significant discrepancies in GST and income tax, particularly from property sales subject to the bright-line test – a rule that taxes profits from residential properties sold within a set time after purchase.
🏗️ Developers Under the Microscope
The largest chunk of the $153.5 million discrepancy came from property developers, who were found to have claimed large GST refunds on costs but failed to pay the required tax on property sales.
“Where we expect a GST payment from a property sale and don’t see the sale in the return, we contact the developer,” said an IR spokesperson.
“If there’s no response or return filed, we take enforcement action quickly.”
So far this year, IR has uncovered $72.9 million in discrepancies from developers alone, representing a 48% increase from the same period last year.
💡 Bright-line Breaches Continue
The bright-line test, which captures property sold within 10 years of purchase (or 5 years depending on the purchase date), continues to catch out investors unaware – or avoiding – their tax obligations.
IR reports a 9% rise in discrepancies under the bright-line rule, amounting to $14.15 million. However, education efforts are helping, with more than 550 customers assisted so far this year and $3.68 million in voluntary disclosures processed.
“We’re encouraging anyone who’s sold property recently to use our property tax decision tool and determine if tax is owed,” said IR.
🔄 GST Games Raise Red Flags
Inland Revenue also flagged a surge in GST manipulation, with companies and individuals altering land use or transferring ownership between entities to avoid tax.
These practices, often involving complex entity structures and inconsistent GST registration, have resulted in nearly $60 million in detected discrepancies – a 39% increase compared to the same period last year.
“We’re picking up non-compliance quickly using advanced analytics and automated tools,” IR said.
“Changing ownership or use to dodge GST doesn’t work – we see it, and we act.”https://www.propertynoise.co.nz/want-better-leads-smarter-prospecting-starts-here/
🏡 What It Means for the Property Sector
For investors, developers, and landlords, this latest crackdown is a clear warning: tax obligations in property are under tight surveillance, and non-compliance is no longer easy to hide.
Whether it’s GST on a development, bright-line liabilities, or land-use declarations, full transparency is critical – especially as IR continues to invest in real-time analytics and AI-powered compliance tools.
🔍 Key Takeaways for Property Professionals
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Developers: Be cautious about claiming GST on development costs without reporting corresponding sales.
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Investors: Know your bright-line responsibilities, especially if your property was sold within the relevant timeframe.
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Businesses: Avoid shifting land between entities or changing its use without updating GST obligations.
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All parties: Seek professional tax advice and disclose early – voluntary compliance may reduce penalties.