Make a payment
Residential land withholding tax Tāke Rawa Kāinga

Your obligations as a withholder

If you're a withholder, you'll need to check if residential land withholding tax (RLWT) applies to a property sale and if it does, calculate, deduct and pay it to us.

Checking if residential land withholding tax applies to the property sale

As a withholder you're expected  to check the following criteria are met  to identify if RLWT applies to a property sale:

  • the vendor purchased the property on or after 1 October 2015 through to 28 March 2018 inclusive and owned it for less than two years, or
  • the vendor purchased the property on or after 29 March 2018 and owned it for less than five years, and
  • the property disposed of is New Zealand residential land, and
  • the vendor is an offshore RLWT person.

To confirm if RLWT needs to be deducted, you'll need to get a signed Residential land withholding tax declaration (IR1101) from the vendor (this includes companies, trusts and limited partnerships).

You'll need to check the IR1101 has been completed and all accompanying documents have been provided. You'll also need to check the accompanying documents can be "reasonably relied" on.

If the vendor doesn't give you an IR1101 when they're required to, or it is incomplete, you may assume they're an offshore RLWT person if they meet the other withholding requirements and deduct RLWT from the residential land purchase amount. This may avoid you having to pay penalties.

Reasonable reliance

To avoid penalties, it's important you're able to reasonably rely on the IR1101 and accompanying documents that you're given.

Note: Reasonable reliance doesn't apply to you if you're a withholder who is associated to the vendor.

Below are examples of what is meant by reasonable reliance.

  • The vendor is currently in New Zealand and gives you their New Zealand passport to show they are a New Zealand citizen, to verify they're not an offshore RLWT person. You should check the passport is valid and hasn't been altered.
  • An individual vendor provides you with a Land Transfer Tax Statement saying they're an offshore person, but they've completed the IR1101 saying they're not an offshore RLWT person. You should question the vendor about this and advise them to seek independent tax advice to make sure they've made the correct determination.

It's an offence to fail to provide a declaration or to make a false declaration

If the vendor doesn't give you the information and documents they need to, they may be committing an offence under the Tax Administration Act 1994.

Back to top

Calculating residential land withholding tax on a property sale

Our Residential land withholding tax calculator will help you work out how much RLWT to deduct.

If the property sold is jointly owned you only need to work out and deduct RLWT based on the property share of the offshore RLWT person.

One of the components in Calculation 2 is the vendor's original purchase price. You should be able to get this figure from the vendor, eg, from their original sale and purchase agreement. If you're unable to get this from the vendor, you can get this information from the Quotable Value website (there may be costs to this if you don't already have access to it).

Find out more about how RLWT is calculated

Calculating residential land withholding tax on blocks of land

If the vendor acquired a block of land but:

  • has since subdivided it into several lots, and
  • is selling each lot

the vendor will have to decide how to calculate the original purchase price of each separate lot. This may be based on the:

  • number of lots
  • area of each section
  • anticipated sale prices, or
  • frontage.
Example 1 - Number of lots

Tom purchases a bare piece of land which is 2,000m² in size for $1,000,000. He subdivides the block into 4 separate 500m² lots and sells one of them for $400,000.

Note: Tom believes the remaining 3 lots will have the same anticipated sales price as they are similar.

Purchase price of original block of land $1,000,000
Number of lots 4
Purchase price of each lot $250,000

Tom should use $250,000 as the purchase price of the subdivided section in his RLWT calculations.

Example 2 - Area of each section

Michelle purchases a property which is 2,500m² in size and has an existing house valued at $600,000 with the total purchase price of the property being $1,750,000.

Michelle then subdivides this property which creates two new titles. She keeps the first new title consisting of 2,000m² of land together with the existing house. Michelle sells the second new title which consists of 500m² of bare land.

Purchase price of property prior to subdivision $1,750,000
Value of building $600,000
 
Purchase price of bare land before subdivision $1,150,000
Purchase price of land per m² ($1,150,000 ÷ 2,500m²) $460
Purchase price of bare land for new title ($460 x 500m²) $230,000

Michelle should use $230,000 as the purchase price of the subdivided section in her RLWT calculations.

Example 3 - Anticipated sales prices

Michael purchases a bare piece of land which is 2,000m² in size for $1,000,000. He subdivides the block into 4 new equally sized 500m² titles.

Although the sections are the same size, the anticipated sales values are not the same because the newly created titles have different characteristics.

Michael has worked out the anticipated sales price of each section taking into account the location, condition, size and frontage of each section together with recent local sales.

He now wants to know how to calculate the correct purchase price for each section so he can account for his RLWT obligations.

New title 1 with Anticipated Sale Price (ASP) $650,000
% ASP/Total Original purchase Purchase price for RLWT
32.5% $1,000,000 $325,000
New title 2 with Anticipated Sale Price (ASP) $500,000
% ASP/Total Original purchase Purchase price for RLWT
25.0% $1,000,000 $250,000
New title 3 with Anticipated Sale Price (ASP) $500,000
% ASP/Total Original purchase Purchase price for RLWT
25.0% $1,000,000 $250,000
New title 4 with Anticipated Sale Price (ASP) $350,000
% ASP/Total Original purchase Purchase price for RLWT
17.5% $1,000,000 $175,0000

Michael should use $325,000 as the purchase price for new title no.1, $250,000 for new titles no.2 and no.3 and $175,000 for new title no.4 in his RLWT calculations.

Example 4 - Frontage

Janet purchases a piece of bare land which is 1,000m² in size for $800,000. There is 115m² of frontage on this land. She then subdivides this in half resulting in two new 500m² titles.

One of the titles retains the frontage and is therefore superior to the rear section.

Janet decides to keep the front section on which she will build her own private dwelling. She sells the rear section and wants to know how to calculate the correct purchase price for RLWT purposes.

Calculations:
Frontage Total size including frontage Percentage of total size
115 m² 615 m² 55.16%
Nil 500 m² 44.84%
  1,115 m2  

Janet should use $358,720 as the purchase price of the subdivided rear title in her RLWT calculations.

Original purchase price $800,000
Portion attributed to the rear section 44.84%
Purchase price of rear section $358,720

Calculating residential land withholding tax when receiving part payments/deposits

If RLWT applies to the property sale and the purchaser is paying in instalments, you'll need to start deducting RLWT once all deposits and part-payments total 50% or more of the sale price.

Example of paying in instalments

Elizabeth is an offshore RLWT person and agrees to sell her house to Rebecca for $500,000. The contract requires Rebecca to pay a 10% deposit of $50,000 with the remaining $450,000 to be paid upon settlement.

RLWT is not required to be deducted from the $50,000 deposit because this amount is less than 50% of the sale price, but is required to be deducted once the $450,000 is paid upon settlement. RLWT is always calculated based on the sale price, in this case it's $500,000.

Disbursements that have priority over residential land withholding tax

You'll need to calculate and pay RLWT before any other disbursements. The only exceptions to this are payments to:

  • cover any mortgage or other security with a New Zealand-registered bank or licensed non-bank deposit taker against the property, or
  • outstanding local authority rates.

Back to top

What happens when you've deducted residential land withholding tax

You need to file a Residential land withholding tax return (IR1100) and pay the RLWT to us by the 20th of the month after deductions were made. For example, deductions made in July are due 20 August.

You can email your return and make payment online or send both to us in the post.

You need to provide the seller with the amount of RLWT deducted, eg, on the settlement statement. The seller will need this amount to complete their end-of-year income tax return.

If you don't have enough money to pay

If you don't have enough to pay RLWT that should've been withheld, you still need to complete the IR1100. You'll need to note the actual amount deducted and paid to us on the form, even if the amount is zero.

If the amount paid to us is less than the amount of RLWT that should've been deducted attach a letter advising why. If we don't receive a letter we'll calculate the amount of RLWT owing based on the amount required to be deducted.

Penalties and interest

As a withholder, penalties and interest may apply if your return or payment is made late.

Find out more about penalties and interest

Keeping records

If you're a withholder who is the vendor's or purchaser's lawyer or conveyancer, you need to keep the IR1101 form and any accompanying documents for at least seven years.

If you're a withholder who is the purchaser and you:

  • have a conveyancer, give them the form and copies of all supporting information to hold with their records of the property transaction
  • don't have a conveyancer, within one month you need to send us the original IR1101 and copies of all supporting information. You don't need to keep these records.