Special team zeroes in on landlords and speculators, netting $258 million in unpaid tax in past 5 years.

Inland Revenue's 52-strong property compliance team has generated an extra quarter of a billion dollars that landlords and property flippers avoided paying in the past five years.

The team is spread around the country, with a strong focus on the hotspot of Auckland, and is charged with finding people who have not paid the required tax on rental income or property speculation.

GST is another focus.

Once the target is identified, the team must then recover the money.

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IRD has released to the Weekend Herald a table showing how it pulled in more than $258 million from tax "discrepancies" in the past five years and $63.3 million between June last year and March this year.

Many more millions in discrepancies are expected before the June 30 financial year is up.

The team has exceeded its base $45 million annual tax target in each of the past five years, an IRD spokeswoman said.

Andrew King, the NZ Property Investors Federation's executive officer, said landlords were well aware of their tax obligations and paid their share but was disdainful of tax cheats.

"The fact is if anyone buys a property in New Zealand with the intention of selling it for a profit, then any profit they make is taxed," King said.

But Finance Minister Bill English has hinted at beefing up IRD's property investigation powers when the Budget is presented to Parliament on May 21 and that might mean strengthening the team, or taking other measures to ensure the tax net captures all landlords and property flippers.

IRD did not specify whether its extra $258 million came from landlords avoiding paying tax on rental income or from property flippers not paying tax on profits, but the IRD spokeswoman who released the data said the property compliance team operated all around New Zealand and the amount it was earning was rising steeply.

"[The] property compliance programme is a key part of our compliance focus on property transactions.

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"A major focus continues to be ensuring people speculating or trading in residential property are meeting their tax obligations.

"This includes everything from one-off speculative transactions or those developing a pattern of dealing," she said.

"In 2014, approximately $52.4 million of discrepancies were assessed by the programme. The programme's annual target has been $45 million each year for the four years of Budget 2010 funding, and has been continued as a target for the 2015 year. We are currently on track to exceed this amount."

Asked if staff numbers were being beefed up to cope with Auckland, she said there was a slight increase in staff resources in 2010.

"This was in response to Budget 2010 allocations, effective 2011, ensuring staff were available to undertake investigative work from July 1, 2010. Staffing numbers have been relatively static since then," she said.

"Trading and speculation in property occurs throughout New Zealand and we maintain a national focus.

"However, there are natural hotspots of activity such as Auckland and areas of the South Island which receive a more intense focus from speculators and therefore IRD's property compliance programme."

The team investigates many different types of property deals including property development/speculation, residential investments that cross into property dealing, off-the-plan sales and land banking.

"We also look at GST refunds where no taxable activity has taken place and incorrect application of the compulsory GST zero-rating rules for land transactions. We often deal with people who buy a property in a hotspot area with the idea of renting it out for a short period then selling it.

"Sometimes they mistake the gain made as capital in nature, when in fact due to the intention of resale from the outset the profit is taxable.

People who buy properties to renovate and sell are sometimes unaware the profits made from such sales are generally taxable.

"Determining a buyer's intent is a large part of determining if a transaction is taxable," she said.

"Unfortunately, there are occasions where those speculating [on] residential properties will falsely claim the reason for buying was anything but resale. However, each case is investigated to determine the true intent of the individuals involved, based on the facts."

The team also monitors properties which have been the subject of historical GST claims to ensure these are treated correctly when sold.

"We monitor movement on more than 28,000 individual titles and check the returns when properties are sold," she said.

"We also look at new developments to identify speculative trading in those developments. An example includes land and building packages purchased and then quickly sold on upon completion, some as many as three times in the first year."

• For more information, visit www.ird.govt.nz/property/