Revenue is clamping down on property speculators and land
Although, it is widely said that New
Zealand does not have a capital gains tax, in certain circumstances
capital gains on land transactions are in fact taxable.
five main categories of taxable land transactions. We've summarised
the key things you need to know to take away the
with the intention of re-sale
taxpayer buys land with the purpose or intention of disposing of
the land, the taxpayer will be liable to pay tax on the increase in
value of the property at the time of sale.
The taxpayer's purpose or intention must
have "crystallised" at the time the property was purchased. If a
taxpayer acquires property with a vague hope that the property will
be a good investment, the gain in value of the property will not be
A typical example in this category is a
associated person is a land dealer, developer or
taxpayer or an associated person carries on a business of dealing
in land, developing land or erecting buildings and
- Acquires a
property for the purpose of their business; or
- Disposes of
the property within 10 years,
will be liable to pay tax on the increase in value of the property
at the time of sale.
An associated person includes a relative,
a trustee of a relative, a settlor and a beneficiary, and two
example in this category is a land dealer, land developer or
builder selling a holiday home within 10 years of
within 10 years
taxpayer undertakes a development or subdivision, that is not of a
minor nature, within 10 years of buying a property, the amounts
derived from the sale may be taxable.
is of a minor nature depends on all the circumstances of each case,
having regard to the time, effort, difficulty and expense
involving significant expenditure
taxpayer subdivides a property and incurs significant expenditure
in doing so (for example, drainage, power and roading), the amount
derived from the sale of the properties may be taxable.
Increase in value due
least 20 per cent of the gain in value of a property is due to a
change in zoning, resource consent or similar factors, the increase
in value of the property is taxable. The sale must occur within 10
years of purchase. Further, in some circumstances, a deduction is
allowed depending on the number of years the property was
example is where a taxpayer receives a windfall because of
re-zoning into a popular school zone.
exemptions for tax liability under each category. The major
exemptions are where the property is the taxpayer's own private
residence, business premises or a farm.
consideration needs to be given to what actions or intentions can
trigger the commencement of a taxable 'scheme', not just to
determine whether a scheme is taxable or not, but to calculate any
potential profit on sale.
above is a broad summary only, is not legal advice and should not
be acted or relied upon without seeking legal