Articles by Anna Loginova
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It is a requirement in New Zealand for parties to provide their IRD numbers when buying or selling real estate (whether as an individual or through another entity such as a company or trust). Normally this does not pose any sort of problem.
However, there will be significant issues if you are selling a property that has been generating rental income, and that income has not been declared to the Inland Revenue Department (IRD). This is because there is a legal obligation in New Zealand to declare income and file tax returns for rental properties, even if the property owner lives overseas. (Note that there is an exemption for the provision of private boarder services.)
If tax returns have not been filed, the sale of the property can easily trigger the interest of the IRD. We know of some cases where income has been received for 10 years or more and no tax has been paid. Clearly this can result in large penalties and interest payable to the IRD. If the tax remains unpaid, there can be worse consequences, including imprisonment. Note that the IRD has other means of discovering unpaid tax on rental (and other) income, so don’t think you are immune just because you are not selling your property.
There are of course ways to optimise the amount of tax you have to pay, and at GRA we are experts in this area (while at the same time knowing how to structure your affairs so your assets are protected). While we are great advocates of optimising your tax, tax evasion is completely different, not to mention highly illegal, and is not something we would ever condone.
We have had a number of potential new clients come to see us who have not declared rental income. Being from another country and ignorant of New Zealand’s tax rules is not an excuse, and the IRD tend to be very aggressive in this area.
If you are in a situation where you have undeclared income (rental or otherwise), contact us at GRA – we can sort out your overdue tax returns and we are often able to negotiate to reduce the penalties with IRD. We have a great deal of experience with such issues and have a very constructive relationship with the IRD. Trying to do this on your own without the help of expert tax advisers is very difficult (not to mention stressful) and will more often than not result in a worse outcome for you. You can contact us in strictest confidence on (09) 522 7955, info@gra.co.nz or via our website.
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