The Government's new capital gains tax on people selling residential property within two years of buying it comes into effect today with what some believe are unforeseen complications.
The brightline test was introduced in the Budget earlier this year to try to take some heat out of the Auckland property market where values had increased by more than 60% since 2008.
But Marks & Worth associate Stephanie Pettigrew warned yesterday it appeared Inland Revenue had underestimated the large number of family trusts which owned a home but did not own income earning assets and therefore did not have an IRD number.
''There are concerns in the legal profession Inland Revenue is going to be inundated with applications for IRD numbers and there will be delays in granting them.''
To apply for an IRD number for a trust, a copy of the trust deed and full names along with IRD numbers for each of the trustees needed to be provided. Applicants needed to print and complete an IR 596 form and post it to the department.
IRD stated it would take eight to 10 working days to process an application, and applicants should also allow two to three days either side for the document to be posted to and from IRD.
''So it could be up to three weeks to obtain and IRD number. There is currently no option to apply for an IRD number online.''
In order to avoid delays with property settlements, trusts owning property and not having an IRD number should apply for the number before they began the process of selling or buying propertyThe extra requirements on lawyers and conveyancers to collect tax information at settlement were effectively making them information gatherers for IRD, Ms Pettigrew said.
There would be extra costs associated with complying with the requirements - which IRD would not be paying. That was likely to have an effect on the costs associated with conveyancing which would be passed on to consumers.
