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Understanding residential land withholding tax
Residential land withholding tax (RLWT) is a tax deducted from some residential property sales.
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Residential land withholding tax (RLWT) will apply if:
- a sale amount is paid or payable on or after 1 July 2016, and
- the property sold is in New Zealand and defined as residential land, and
- the seller:
- has purchased the property on or after 1 October 2015 through to 28 March 2018 inclusive and owned the property for less than two years before selling, or
- has purchased the property on or after 29 March 2018 and owned the property for less than five years before selling, and
- is an offshore RLWT person.
The definition of "offshore RLWT person" is not the same as the definition of "offshore persons" for IRD number applications.
To be able to identify if RLWT needs to be deducted, any person or entity (whether they're offshore RLWT persons or not) selling New Zealand residential property will need to complete a Residential land withholding tax declaration (IR1101), if the purchase date was:
- on or after 1 October 2015 through to 28 March 2018 inclusive and sold within two years, or
- on or after 29 March 2018 and sold within five years.
The IR1101 needs to be given to your withholder along with any required accompanying documents stated on the form. If you don't give your withholder the information and documents you need to, you may be committing an offence under the Tax Administration Act 1994.
The RLWT rules do not apply to the sale or disposal of inherited properties or relationship property settlements.
Holders of a valid certificate of exemption also won't have RLWT deducted.
If you've had too much RLWT deducted you may be able to claim back the amount deducted.
If your withholder isn't able to deduct the full amount of RLWT due on the sale of your property because of insufficient funds, you're required to pay the balance of the RLWT due. We'll contact you and let you know if you need to do this.
There are three calculations your withholder must make to work out how much RLWT to deduct.
The lesser amount from these calculations is the amount of RLWT that will be deducted.
The amounts in these calculations are excluding GST even if you’re not GST registered.
Sale price x 10%.
The greater of:
- (sale price less purchase price the seller originally paid for the property) x RLWT rate, or
There are two options for this calculation depending on who the withholder is.
If the seller's conveyancer is the withholder, then the greater of:
- sale price less any amounts required to cover any mortgage or other security with a New Zealand registered bank or licensed non-bank deposit taker against the property and less any outstanding local authority rates, or
If the purchaser's conveyancer or the purchaser is the withholder, then the greater of:
- sale price less any outstanding local authority rates, or
These rates are used in calculation 2.
The RLWT rate for companies and incorporated clubs and societies is 28%.
The RLWT rate for individuals, all other non-individuals and companies acting as trustees of a trust is 33%.
If the property is jointly owned, the RLWT deducted is only based on the property share of the offshore RLWT person.
Your withholder can use our Residential land withholding tax calculator to work out how much to deduct.