IRD chasing students, not speculators

Newsroom report that IRD have 64 staff dedicated to chase up student loan repayments from people who have moved overseas, and none working solely on property speculators who ignore the bright line test.

I don’t think it is this simple, but this does look like a system slanted against students and easy on speculators.

Newsroom: IRD chases students while speculators go free

In spite of the bright-line test having an incredibly low compliance rate, Inland Revenue has no full-time staff chasing property investors who fail to pay what they owe.

The test, which came into effect in late 2015, is designed to crack down on property speculation by automatically taxing profit made on the sale of residential property (other than the main home). Initially it applied to property sold within two years of purchase but earlier this year the Government passed legislation extending it to property sold within five years.

Nearly one in three eligible property investors fails to comply with the test and documents released to Newsroom under the Official Information Act show the compliance rate is worsening. A report given to Revenue Minister Stuart Nash in May estimated bright-line test compliance could be lower than 50 percent. 

Despite this, the IRD has not, in the three years since the bright-line test was implemented, established a team for chasing non-compliance and recovery.

Information released under the OIA to Newsroom said the IRD did not have dedicated teams for bright-line recovery nor did it have a separate budget for bright-line recovery activity. Instead existing staff were used to track down people who had not filed a return for possible tax due under the bright-line test.

In contrast:

This stands in stark contrast to the student loan system, which has 64 staff chasing borrowers who have moved overseas and are behind on their repayments. The team had a budget of $2.245 million for the period July 1, 2017 to January 2018.

This sits on top of more than 3000 staff across IRD involved in some way with compliance activity and debt recovery, including chasing overdue student debt.

The 64 staff employed by the student loan team are “predominantly” tasked with tracking down more than 75,000 overseas borrowers who collectively owe $1.2 billion dollars, according to the latest report from IRD. 

Tax on property speculation is a part of whole tax obligations for those dealing in property, so could be picked up through general tax checks, but it does seem odd that more focus isn’t put on it, given the current and last Governments’ talk on cracking down on property speculation.

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16 Comments

  1. David

     /  September 13, 2018

    The info comes from LINZ, you put your IRD number and stat declaration through your lawyer on the sale and purchase agreement and LINZ gives the data to IRD so theoretically if the IRD puts a flag to check your end of year return you wouldnt need dedicated staff.
    I would guess it gets administered by existing compliance staff as part of normal business.

    Reply
    • Trevors_elbow

       /  September 13, 2018

      Thanks for that tech detail David… as I suspected it looks like a distraction story because the coalition is engaging in stupid and turf warfare

      Reply
  2. Trevors_elbow

     /  September 13, 2018

    So…..

    Is there an investigation unit which targets property as a sector? I seem to recall reading that there is an it has assessed tax on property speculators in the past.

    Are the media playing games by asking about a specific dedicated unit when all the bright line test is a clear specification to underpin the long standing buy to sell and you’re trading rule?

    This smells like a distraction story… evil property speculators and all that.

    The Labour spin machine revving in high gear I suspect..

    Reply
    • David

       /  September 13, 2018

      It gets a bit tiresome the constant attack on landlords or anyone involved in property. I pay an eye watering amount in tax and gst, I employ oodles of trades people, accountants, lawyers, real estate agents, property managers and the list goes on and on.
      Sure there are some dodgy people in the industry but for example if you are in software you are lauded despite quite a few IT people collecting mountains of kiddie porn. Lawyers empty their trust accounts but its a revered profession…bloody tiresome to be honest.

      Reply
      • Griff.

         /  September 13, 2018

        Yess dave
        landlords are not making money from rent they are relying on capital gains .
        If that is their business model they should be paying tax on the income from capital gains.
        That is the law …….

        Reply
        • David

           /  September 13, 2018

          Not me Griff, dumb having a property that runs at a loss and the IRD wont let you run continually at a loss.

          Reply
          • Griff.

             /  September 13, 2018

            Almost all landlords fail to cover the lost opportunity cost of the investment with income from rent.
            Auckland average

            Auckland Average sale price (3 bedroom) $920,234
            Average rent per week (3 bedroom) $552
            Gross yield 3.13%
            High rated bank .4% gross on a term deposit.
            The risk of property investment is far higher as is the difference between gross return and net for a rental and a term investment.

            The share market would be closer to the risk of property investment. The return for blue chip shares is about 6% gross.

            Ergo.
            Much Retail property investment is speculation on capital gains .

            Reply
            • Pink David

               /  September 13, 2018

              Griff, you are quite right. Rents should rise significantly to allow landlords to profit on the income.

        • Trevors_elbow

           /  September 13, 2018

          I agree Griff… however that is not how the law is written is it.

          Reply
  3. High Flying Duck

     /  September 13, 2018

    A complete BS story. The IRD have been focusing on property for a number of years, with significant resource specifically allocated to ensuring property transaction compliance:

    “In 2008 a team was established to address any compliance risks with property development and speculation and associated tax obligations.

    In 2015 the Government introduced new legislation and provided additional funding for Inland Revenue to put further focus on residential property speculation of $6.65 million each year for 5 years.

    This amounted to an effective doubling of resources reviewing property compliance. We now have around 95 staff focusing on risks in the residential property market to make sure customers meet their obligations in relation to returning any applicable tax on property gains.

    As a result, Inland Revenue has assessed additional tax owed in property transactions at over $70 million for the 2016 financial year, and for the 2017 financial year we have surpassed $100 million.”

    https://media.ird.govt.nz/articles/property-compliance-at-inland-revenue/

    Reply
    • Trevors_elbow

       /  September 13, 2018

      Thanks for finding that press release and link…. that was my recollection that there already was targeting of property transactions and had been for years…

      Cheers

      Reply
    • Trevors_elbow

       /  September 13, 2018

      Indeed Noel… a lot of money that could be used elsewhere tied up in unpaid loan commitments. Sign a contract’ then you should honour the contract not skip the country and ignore your obligations….

      Reply
  4. FarmerPete

     /  September 13, 2018

    The premise of this story is patently false.

    Reply
  5. Trevors_elbow

     /  September 13, 2018

    Pete… the comments below show with links that this story is a narrowly focused beat up around the bright line test. Property has a specialist team already.

    You often comment on Fake News and this is another example of poor reporting it would appear making it very slanted and possibly Fake

    Reply
  6. Gezza

     /  September 13, 2018

    Unpaid student loans: NZ$1.2 billion – 64 staff needed to constantly chase up

    Property tax owing (2017): $100 million, most of which is unavoidably being paid anyway and doesn’t need dedicated staff to chase up.

    Have I got that right?

    Reply

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