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It is well known that New Zealand does not have a capital gains tax regime.
However, less well known are the various ways in which the sale of land can give rise to taxable income. These include:
- Land acquired with an intention of resale
- Land disposed of within the 5 or 10 year bright-line period
- Land sold by taxpayers in the business of land dealing, developing or building or where land is disposed of within 10 years and the owner is associated with a land dealer, developer or builder.
- Subdivision or development schemes commenced within 10 years of acquisition involving more than minor expenditure
- Major subdivisions involving significant expenditure on certain types of work
- Land sold within 10 years of acquisition where there has been a change affecting the land, such as a rezoning, and at least 20% of the gain is due to that change.
The Inland Revenue Department have committed significant resources to the property investigations team. It is important that taxpayers understand their tax obligations in relation to land transactions.
