McClay Todd: Taxation (Bright-line Test for Residential Land) Bill — Third ReadingText is incorporated into the Bound VolumeMcClay Todd: Taxation (Bright-line Test for Residential Land) Bill — Third Reading[Sitting date: 12 November 2015. Volume:710;Page:7994. Text is incorporated into the Bound Volume.]Hon TODD McCLAY (Minister of Revenue): I move That the Taxation (Bright-line Test for Residential Land) Bill be now read a third time. The changes in this bill were announced by the Government in Budget 2015 as part of a package of proposals to improve compliance with the current land sale rules and to help ensure that people pay their fair share of tax on gains from those property sales. Detailed proposals were released for public feedback in June which has helped to shape the measures proposed in the bill.The centrepiece is a new brightline test to supplement the current intention test in the Income Tax Act and make it clear that income tax must be paid on any gains from residential property purchased and sold within 2 years. After the 2-year period the current intention tests will remain. This means where somebody buys property with the intention of making a profit they must pay income tax on that gain. The Inland Revenue Department (IRD) will be watching transactions as part of the requirement to provide IRD numbers at the time of sale. This will allow it to enforce income tax rules against those who might try to avoid their obligations outside the 2-year period.The Government has provided the IRD with $29 million in Budget 2015 to focus on property tax compliance. In total it has $62 million over 5 years which is expected to generate an additional $420 million of property-related tax revenue. There are likely to be up to an additional 100 compliance officers as part of the property compliance team.The only exceptions to the brightline test are as follows: an owner’s own home inherited property or property transferred in a relationship settlement. Furthermore the proposed test will apply to the disposal of residential land only and not to business premises or farmland. It also clearly identifies the start and end of the 2-year brightline period. The proposed tests will apply to the gains from residential property acquired on or after 1 October 2015 and disposed of within 2 years. These are the main provisions in the bill. What we have is a straightforward easy to enforce rule that will help improve compliance with tax rules for land sales and make the tax system fairer.As always I am grateful for the efforts of all those who have contributed towards the successful package of this bill so far. My thanks go to the officials who have worked on the policy development of this proposal in the bill and to the drafters who worked on the detail of the draft legislation. I also want to thank those who made submissions both in the earlier period and on the bill to improve its application in practice. Finally I want to thank the Finance and Expenditure Committee for its consideration of the proposed measures and recommendations to improve them overall.Hon Clayton Cosgrove: It’s all David Bennett’s work.Hon TODD McCLAY: As the bill now stands we have a very practical mechanism for achieving greater fairness and transparency across the House.As unusual as it is I want to thank Clayton Cosgrove for also deciding although speaking heavily against this bill to vote for it and I look forward to the party vote to confirm that. I have great pleasure in commending the Taxation (Bright-line Test for Residential Land) Bill to the House.