DB 18A Ring-fenced allocations: disposal of residential land within 2 years
When this section applies


This section applies to an amount of a person’s deductions (bright-line deductions) under section DB 23, for an income year, that relate to residential land for which the person derives income solely under section CB 6A (Disposal within 2 years: bright-line test for residential land).

Basis for allocation of deductions: formula


The amount of bright-line deductions allocated to an income year, including an amount that has been carried forward and allocated under subsection (4), is no more than the amount calculated by the formula—

bright-line income + land net income.

Definition of items in formula


In the formula,—


bright-line income is income derived solely under section CB 6A:


land net income is the amount of net income for the year that the person would have if the only income they derived was from the disposal of land under sections CB 6 to CB 14 (which relate to income from land).

Excess allocations: carried forward and reinstated next year


Any excess deductions not allocated to the income year because of subsection (2) are carried forward and treated as—


deductions under section DB 23 that relate to residential land for which the person derives income solely under section CB 6A; and


allocated to the next income year.

Restriction on reinstating excess allocations: continuity for companies


Despite subsection (3), the excess is not allocated to the next income year, and no deduction is allowed or allocated to any income year for the excess, if sections IA 5 and IP 3 (which relate to the carrying forward of tax losses for companies) would not have allowed the excess to be carried forward to that next income year in a loss balance, treating the excess as a tax loss component arising on the last day of the income year.

Defined in this Act: deduction, dispose, income, income year, land, loss balance, net income, residential land, tax loss component

Section DB 18A: 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 10(1) of the Taxation (Bright-line Test for Residential Land) Act 2015 (2015 No 111).