Tax law change will fix loophole

Revenue Minister Peter Dunne. Photo / Sarah Ivey

A tax bill introduced to Parliament last week will close the loophole exploited by "phoenix" schemes from next April 1.

These involve Inland Revenue refunding goods and services tax to a GST-registered purchaser when no corresponding GST payment was made by the vendor because it was an associated entity and had been deliberately wound up before paying the GST.

"This practice has been of particular concern in the property sector," Revenue Minister Peter Dunne said. "The bill will require GST-registered vendors to charge GST at a zero rate on most transactions involving land, or in which land is a component, if the purchaser is also GST-registered."

The rules will not apply to land intended as the buyer's, or a relative's, main residence.