The Auckland District Law Society's property law commission has made a submission against the Government's planned tax change, due to come into effect on July 1, according to the NZ Herald.
The change would apply a potentially punitive resident withholding tax to overseas-based traders who buy then sell within two years, which the society says could further starve Auckland’s housing supply by stopping overseas land and apartment developers working in Auckland’s housing market.
"This could literally stop development in Auckland overnight,” says North Shore-based lawyer Nick Kearney.
“Developers will be scared and they will just hold the land. If overseas developers don't develop property, who's going to do it? We have always had foreign capital coming in and this country needs it."
"The development of housing has been a topic du jour for some time and in effect the Government will be scoring an own-goal by failing to include an exemption for reputable offshore persons/developers," the society said.
But Former Revenue Minister Todd McClay said the change was the third part of the Government's investment property tax reforms announced in the Budget.
"This measure will act as a collection mechanism for the new bright-line test, which applies to gains from the sale of residential property purchased on or after 1 October 2015 and sold within two years," McClay said.
"The RLWT [residential land withholding tax] proposal in the bill, together with the new bright-line test and changes to collect better tax information about buyers and sellers of residential property will help to ensure that everyone pays their fair share of tax on gains from property sales," he said.