Virtually all people buying and selling properties will be required to put their IRD number on land transfer documents from next year, including their main home, in a bid to stop manipulation of the brightline tax.
It means that owner-occupier speculators such as habitual renovators who live in house, do it up, sell it for a profit and move on to the next house will not be able to avoid paying tax on the profit.
At present the IRD number is not required if the property is the seller's main home.
Revenue Minister Stuart Nash said that at present up to a third of land transfers were made without a record of the IRD number of the buyer or seller.
The new move will not change the rules around who is required to pay tax on investment property but it will allow IRD to know who is flipping owner-occupier homes on a regular basis, and better enforce the existing law.
Capital gains tax currently applies in two circumstances:
• To people who buy a property with the intention of gaining income from it on resale, whether or not it is the family home;
• Those people who sell an investment property within five years of buying it (the brightline test).
The brightline test does not apply to owner-occupier homes unless the person buys and sells properties twice or more in two years.
Nash said that IRD needed a complete picture of property transactions to determine if tax rules were being manipulated.
Requiring an IRD number was a small change but it improved the overall integrity of the system.
"If a homeowner regularly buys and sells their properties in a short time-frame, it suggests they are engaged in property speculation and are flipping properties with the intention of creating income," said Nash.
Nash said that when the previous Government introduced the Brightline test, it had made it clear that owner-occupiers with a regular pattern of buying and selling residential properties had to comply with the brightline rule in certain circumstances.
"If an owner-occupier buys and sells properties twice or more in two years, under existing law they are generally considered to be trying to manipulate the brightline test."
The requirement to provide an IRD number on nearly all land transfers makes the rules easier to understand for everyone, Nash said.
It removed uncertainty around what information people need to provide when buying or selling a property.
"Capturing relevant taxation information for property sales will also help us work with jurisdictions in other countries to combat global tax evasion."
Land transfers made by a local authority or under a Treaty of Waitangi settlement would not be captured by the new law.
The Tax Working Group recommended that the IRD number be recorded on the main home.