25 March 2019
Mr Liam Hehir [FYI request #9666 email]
Dear Mr Hehir
Thank you for your request made under the Official Information Act 1982 (the OIA),
received on 25 February 2019. You requested the following:
1. Approximately how much tax revenue has been raised as a result of the
introduction of the bright line test in 2015 for the ownership of residential
2. What estimates does the Department have as to the approximate cost incurred
for establishing and maintaining a system for the collection of income tax under
the bright line test?
For the purpose of question 1., you may assume none of the revenue paid under
the bright line test would have been paid as income tax before the introduction of
I will address each of your questions separately below.
As background, the gain from the sale of property acquired with the intention of resale is
taxable. As intention is subjective, property compliance was difficult to enforce. The
bright-line test was introduced to supplement the “intention test” by being objective and
unambiguous. The bright-line test is one of a number of provisions under the Income
Tax Act 2007 that focuses on the disposal of land. The sale of a property during the
bright-line period may be taxed under the bright-line test, or under other provisions.
When properties are sold, customers are not required to provide Inland Revenue with
the details of the land provision under which their property is taxed. As a result, Inland
Revenue does not hold information at the granular level required to respond to your
request. I must therefore refuse this part of your request under section 18(e) of the OIA
as the information requested does not exist.
Inland Revenue’s bright-line recovery actions are mainly focused on education and
collecting outstanding tax returns with some early compliance measures. We can identify
property sales that are within the bright-line period with the property tax statement data
collected and supplied by LINZ. As mentioned above, such sales may be subject to tax
under bright-line or other land provisions.
A wide range of activities related to property compliance are conducted by Inland
Revenue, with the bright-line test being one of these activities. To date, property
compliance work has been carried out by staff in a range of roles in Inland Revenue.
Property compliance activities are carried out by about 100 of Inland Revenue’s
There is no separate budget for bright-line related collection activity, and staff will deal
with other compliance activities as well as bright-line. This means we cannot provide a
total cost for establishing and maintaining a system for the collection of income tax
under the bright-line test. I must therefore refuse this part of your request under section
18(g) of the OIA as the information requested is not held by Inland Revenue.
Right of Review
If you disagree with my decision on your OIA request, you can ask an Inland Revenue
review officer to review my decision. To ask for an internal review, please email the
Commissioner of Inland Revenue at: [email address].
Alternatively, under section 28(3) of the OIA, you have the right to ask the Ombudsman
to investigate and review my decision. You can contact the office of the Ombudsman by
email at: [email address].
Thank you for your request.
Richard Owen Customer Segment Lead, Small & Medium Enterprises