Shock awaits for tax avoiders
Introduced by the previous government, the bright line test requires income tax to be paid on any gains from residential property sold within two years of acquisition, with some exceptions.
In a bid to dampen property speculation, the government recently introduced legislation into Parliament which aims to extend the bright line test from two years to five.
But a joint IRD-Treasury impact assessment on the government’s proposal has revealed that voluntary taxpayer compliance with the existing bright line rules appears to be less than 50%.
Further, the impact assessment says that non-compliance will continue to be an issue and is identified as an implementation risk if the bright line test is extended over a longer period.
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