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Income Tax Act 2007

Income - Income from business or trade-like activities

CB 11: Disposal within 10 years of improvement: building business

You could also call this:

“Tax on land sold within 10 years of improvements by a house-building business”

If you sell land, you might have to pay income tax on the money you get from the sale. This happens if you or someone connected to you made improvements to the land within 10 years before you sold it. At the time those improvements started, either you or the person connected to you must have been running a business of building houses.

This rule applies even if you or the other person didn’t buy the land for your building business. However, there are some exceptions. If you’re connected to a local council or you’re part of a group of companies that includes Kāinga Ora-Homes and Communities, you might not have to follow this rule. Also, if the land was used for a home or a business, you might not have to pay this tax.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1512429.

Topics:
Money and consumer rights > Taxes
Housing and property > Buying and selling homes
Business > Industry rules
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CB 10: Disposal within 10 years: land development or subdivision business, or

“Income rules for selling land within 10 years if you or someone close to you is in land development”

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CB 12: Disposal: schemes for development or division begun within 10 years, or

“Income from selling land developed or divided within 10 years of purchase”

Part C Income
Income from business or trade-like activities

CB 11Disposal within 10 years of improvement: building business

  1. An amount that a person derives from disposing of land is income of the person if they dispose of the land and—

  2. within 10 years before the disposal, the person or an associate of the person completed improvements to the land; and
    1. at the time the improvements were begun,—
      1. the person carried on a business of erecting buildings:
        1. an associate of the person carried on a business of erecting buildings.

        2. Subsection (1) applies whether or not the land was acquired for the person’s business or an associate’s business.

        3. Subsection (1)(b)(ii) is overridden by the exclusions in sections CB 15C and CB 15D, for bodies linked or associated with a local authority and for companies in the same wholly-owned group as Kāinga Ora–Homes and Communities, and subsections (1) and (2) are overridden by the exclusions in sections CB 16 and CB 19, for residential land and for business premises.

        Compare
        Notes
        • Section CB 11(1) heading: replaced (with effect on 1 April 2008), on , by section 118(1) (and see section 118(3) for application) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
        • Section CB 11(1): replaced (with effect on 1 April 2008), on , by section 118(1) (and see section 118(3) for application) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
        • Section CB 11(2) heading: replaced (with effect on 1 April 2008), on , by section 118(1) (and see section 118(3) for application) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
        • Section CB 11(2): replaced (with effect on 1 April 2008), on , by section 118(1) (and see section 118(3) for application) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
        • Section CB 11(3): replaced (with effect on 1 July 2017), on , by section 118(2) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
        • Section CB 11(3): amended (with effect on 1 October 2019), on , by section 190 of the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 (2020 No 5).
        • Section CB 11 list of defined terms Kāinga Ora–Homes and Communities: inserted (with effect on 1 October 2019), on , by section 190 of the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 (2020 No 5).