Are you aware of your tax obligations as a land owner? And could you answer whether or not you, or the entity that owns land in this country, is a New Zealand entity?

The answers are not as clear cut as you may think.

From July 1, 2016, the Government will introduce a Residential Land Withholding Tax (RLWT), a land tax that will need to be deducted from some residential property sales or disposals.

This is in conjunction with the new Bright-line Test for Residential Land, introduced last October, whereby any offshore vendors who buy and sell residential land within two years are subject to the test.

However, the test doesn’t just apply to individuals, but takes into account beneficiaries of trusts and shareholders of companies.

Land developers, builders and dealers who are offshore RLWT entities need to be extra careful from a cash flow perspective and there are certain exemptions in place that can be applied for.

It is important to note the new legislation is still being ironed out and is unclear as to GST implications, i.e. sale and purchase of land being inclusive or exclusive of GST. 

Various information has already been issued to legal advisers in order that their obligations in respect of retention of funds on settlement are met and vendors and purchasers need to be aware of those obligations prior to signing any land sale and purchase documentation.

We recommend you seek specialist legal advice before any sale and purchase agreement is considered.

(published in The Weekend Sun)