By Frank Newman on 19th February 2018
Last week the Revenue Minister Stuart Nash made good on Labour’s promise to extend the current two-year bright line rule to five years. The change will come into effect once the Tax Bill before Parliament is given the Royal Assent, which is expected by the end of March.
This means any residential property purchased before the date of Royal Assent will remain under the current two-year rule. Remember that ‘purchased’ generally means the date on which title is transferred to the purchaser, not the date the agreement was entered into.
So there is a very small window in which to have current purchase agreements completed before the five year rule comes into effect.
The Minister maintained that the law change was needed to catch property speculators. He conveniently ignores the fact that speculators are already caught under the intention rule regardless of how long they own a property.
The reality is that the bright line rule is not going to have a significant impact on speculators. It will however affect property investors, as they will be less likely to turn over their rental stock within the five years to avoid falling within the government’s definition of being a “speculator”.
And it will affect those who happen to buy a bach and sell it within five years. They too will be labelled a “speculator” and will have to pay tax on any gain, should there be any. And by the way, those who make a loss from their “speculation” can’t offset that loss against other income – they will have to carry the loss forward and will only be able to offset it against future speculative profits, should there be any.
While the idea of having a net to catch those who trade property within a time frame adds clarity to the intention test, the five year time frame is unreasonable. The Minister says the measure will “bring fairness back into the tax system.” The policy is discriminatory. It applies to property only – not to the buying and selling of shares, artwork, cars, one’s primary dwelling, and so on. There is nothing fair about that. And there is nothing fair about the limitations on using losses on resale.
And now to discrimination of a different kind. A property manager got into a bit of strife recently after she told a couple who had applied for a rental home that their application had been declined because they were not Chinese. Apparently the property manager was acting under instruction from the property owner who, the story goes, wanted to be able to speak to the tenants in his native tongue. The non-Chinese speaking couple were more than a little miffed and went public with the issue.
For the record, the Human Rights Commission states, “Discrimination occurs when a person is treated unfairly or less favourably than another person in the same or similar circumstances.”
The Human Rights Act 1993 states the prohibited grounds of discrimination are—
(a) sex, which includes pregnancy and childbirth:
(b) marital status…
(c) religious belief:
(d) ethical belief, which means the lack of a religious belief, whether in respect of a particular religion or religions or all religions:
(g) ethnic or national origins, which includes nationality or citizenship:
(h) disability, which means—
(i) physical disability or impairment:
(ii) physical illness:
(iii) psychiatric illness:
(iv) intellectual or psychological disability or impairment:
(v) any other loss or abnormality of psychological, physiological, or anatomical structure or function:
(vi) reliance on a guide dog, wheelchair, or other remedial means:
(vii) the presence in the body of organisms capable of causing illness:
(i) age, [of anyone aged over 16]…
(j) political opinion, which includes the lack of a particular political opinion or any political opinion:
(k) employment status, which means—
(i) being unemployed; or
(ii) being a recipient of a benefit under the Social Security Act 1964 or an entitlement under the Accident Compensation Act 2001:
(l) family status, which means—
(i) having the responsibility for part-time care or full-time care of children or other dependants; or
(ii) having no responsibility for the care of children or other dependants; or
(iii) being married to, or being in a civil union or de facto relationship with, a particular person; or
(iv) being a relative of a particular person:
(m) sexual orientation, which means a heterosexual, homosexual, lesbian, or bisexual orientation.
That’s quite a list!