Land

CB 6A Disposal within 2 years: bright-line test for residential land
Disposal within 2 years

(1)

An amount that a person derives from disposing of residential land is income of the person, if the bright-line date for the residential land is within 2 years of—

(a)

the date on which the instrument to transfer the land to the person was registered—

(i)
(ii)

under foreign laws of a similar nature to the Land Transfer Act 1952, if the land is outside New Zealand; or

(b)

their date of acquisition of the land, if an instrument to transfer the land to the person is not registered on or before the bright-line date.

Subdivision

(2)

Despite subsection (1), an amount that a person derives from disposing of residential land that results from the person subdividing other land (the undivided land) is income of the person if the bright-line date for the residential land is within 2 years of—

(a)

the date on which the instrument to transfer the undivided land to the person was registered—

(i)
(ii)

under foreign laws of a similar nature to the Land Transfer Act 1952, if the land is outside New Zealand; or

(b)

their date of acquisition of the undivided land, if the land is not registered as described in paragraph (a) at the bright-line date.

Leases with perpetual right of renewal

(3)

Despite subsection (1), an amount that a person derives from disposing of a freehold estate in residential land, acquired as the owner of a leasehold estate with a perpetual right of renewal, is income if the bright-line date for the freehold estate is within 2 years of the grant of the leasehold estate.

Contingent interest

(4)

Despite subsection (1), an amount that a person derives from disposing of a freehold estate in residential land, acquired as the result of the completion of a land development or subdivision, is income if the bright-line date for the freehold estate is within 2 years of the person acquiring an interest, in relation to the land, that is contingent upon the completion of the land development or subdivision.

Start of 2-year period for transfers by registration if trustees change

(4B)

If the person referred to in subsection (1)(a) or (2)(a) is a trustee of a trust who has been transferred the land or undivided land from a trustee of the trust, the date on which the instrument was registered is treated as occurring on—

(a)

for subsection (1)(a)—

(i)

the earliest date (first date) on which an instrument to transfer the land to a trustee of the trust was registered under the relevant law referred to in the subsection, if there has been no intervening transfer to a person who is not a trustee; or

(ii)

the first date following the intervening transfer, if there has been an intervening transfer to a person who is not a trustee:

(b)

for subsection (2)(a)—

(i)

the earliest date (the undivided date) on which an instrument to transfer the undivided land to a trustee of the trust was registered under the relevant law referred to in the subsection, if there has been no intervening transfer to a person who is not a trustee; or

(ii)

the undivided date following the intervening transfer, if there has been an intervening transfer to a person who is not a trustee.

Exception: disposal of land by executor, administrator, or beneficiary

(5)

This section does not apply to an amount that an executor or administrator described in section FC 1(1)(a) (Disposals to which this subpart applies), or a beneficiary described in section FC 1(1)(b), derives from disposing of residential land that was transferred to them on the death of a person.

Relationship with subject matter

(6)

This section applies if none of sections CB 6 to CB 12 apply.

Some definitions

(7)

In this section and section CB 16A,—

bright-line date means, for a disposal of residential land,—

(a)

the earliest of—

(i)

the date that the person enters into an agreement for the disposal:

(ii)

the date on which the person makes a gift of the residential land:

(iii)

the date on which the person’s residential land is compulsorily acquired under any Act by the Crown, a local authority, or a public authority:

(iv)

if there is a mortgage secured on the residential land, the date on which the land is disposed of by or for the mortgagee as a result of the mortgagor’s defaulting; or

(b)

if none of paragraph (a)(i) to (iv) apply, the date on which the estate or interest in the residential land is disposed of

date of acquisition means the latest date on which the person acquires the estate or interest in the residential land.

Defined in this Act: amount, bright-line date, date of acquisition, dispose, estate, income, interest, land, mortgage, person, residential land, trustee, year

Section CB 6A: inserted (with effect on 1 October 2015 and applying to a person’s disposal of residential land if the date that the person first acquires an estate or interest in the residential land is on or after that date), on 16 November 2015, by section 4(1) of the Taxation (Bright-line Test for Residential Land) Act 2015 (2015 No 111).

Section CB 6A(3): amended (with effect on 1 October 2015), on 13 May 2016, by section 40(1) of the Taxation (Residential Land Withholding Tax, GST on Online Services, and Student Loans) Act 2016 (2016 No 21).

Section CB 6A(4): amended (with effect on 1 October 2015), on 13 May 2016, by section 40(2) of the Taxation (Residential Land Withholding Tax, GST on Online Services, and Student Loans) Act 2016 (2016 No 21).

Section CB 6A(4B) heading: inserted (with effect on 1 October 2015), on 21 February 2017, by section 62(1) of the Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017 (2017 No 3).

Section CB 6A(4B): inserted (with effect on 1 October 2015), on 21 February 2017, by section 62(1) of the Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017 (2017 No 3).

Section CB 6A(5): amended (with effect on 1 April 2008), on 30 March 2017, by section 7 of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).

Section CB 6A list of defined terms trustee: inserted (with effect on 1 October 2015), on 21 February 2017, by section 62(2) of the Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017 (2017 No 3).