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LAWCOMM 403 long notes.docx
LAWCOMM_403_long_notes.docx
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LAWCOMM 403 long notes.docx-CONTENTS Tips ...........
LAWCOMM_403_long_notes.docx-CONTENTS Tips ......................................................................................................................................................................................... 4 Introducon ............................................................................................................................................................................
LAWCOMM 403 long notes.docx-CONTENT...
LAWCOMM_403_long_notes.docx-CONTENTS Tips ......................................................................................................................................................................................... 4 Introducon ............................................................................................................................................................................
Page 75
“Land” is defined as including (
secon YA 1
)
:
o
any interest in land;
o
opons to acquire land.
o
But “land” does not include mortgages
DISPOSAL WITHIN 5 YEARS – THE BRIGHT-LINE TEST FOR RESIDENTIAL LAND
Changes to the rule:
o
Inially, the bright-line period was two years (from 1 October 2015)
o
The period was extended to five years (from 30 March 2018)
o
Now, it is to be changed to ten years (from 1 April 2021)
Essenally, an amount that a person derives from disposing of residenal land is income if they dispose of the land
within five years of acquiring it (unless they live in it)
o
The purpose of the bright-line test is to eliminate the problem of having to find out a person’s purpose of
buying land – they would oſten argue that they bought the land to rent it out rather than to sell it and say they
are not caught under secon CB 6
CB 6A
Disposal within 5 years: bright-line test for residenal land
(1)
An amount that a person derives from disposing of residenal land is income of the person, if the bright-line date for the
residenal land is within
5 years
of—
(a)
the date on which the instrument to transfer the land to the person was registered—
(i)
under the Land Transfer Act 2017; or
(ii)
under foreign laws of a similar nature to the Land Transfer Act 2017, if the land is outside New Zealand; or
(b)
their date of acquision of the land, if an instrument to transfer the land to the person is not registered on or
before the bright-line date.
…
(7)
In this secon …
bright-line date
means, for a disposal of residenal 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 giſt of the residenal land:
(iii)
the date on which the person’s residenal 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 residenal land, the date on which the land is disposed of by or for
the mortgagee as a result of the mortgagor’s defaulng; or
(b)
if none of paragraph (a)
(i) to (iv) apply, the date on which the estate or interest in the residenal land is disposed
of
date of acquision
means the latest date on which the person acquires the estate or interest in the residenal land.
Note the following:
o
This secon only applies to residenal land – it does not apply to commercial, industrial or agricultural land
o
This secon does not exclude capital receipts – the point of it is to catch short-term capital gains
o
This secon applies irrespecve of the taxpayer’s intenon at the me the land was acquired
o
This secon incorporates rules for determining how the 5-year period is to be determined (
secon CB 6A(1)
and
secon CB 6A(7)
)
o
This secon does not apply to:
The taxpayer’s main home (
secon CB 16A
)
This exempon is available in respect of land held in a trust (
secon CB 16A(1)(b)
)
A taxpayer is only entled to one main home (
secon YA 1
)
A taxpayer who has a regular paern of acquiring and disposing of residenal land is not
entled to the exempon (
secon CB 16A(2)
)
Inherited land (
secon CB 6A(5)
)
Land transferred on a selement of relaonship property (
secon FB 3A
)
o
This secon is supported by rules aimed at prevenng avoidance using companies and trusts (
secons GB 52
and GB 53
)
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