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Income Tax Act 2007

Income - Income from business or trade-like activities - Exclusions for residential land

CB 16: Residential exclusion from sections CB 6 to CB 11

You could also call this:

“Exemption from tax when selling your main home”

You don’t have to pay tax on the sale of your house if you live in it. This applies to the land your house is on and some extra land around it. Here’s how it works:

If you buy a house or build one, and you or your family live in it as your main home, you don’t have to pay tax when you sell it. This also applies if you’re a trustee and a beneficiary of the trust lives in the house.

The tax-free part includes the land your house is on. It also includes extra land up to 4,500 square metres. If you need more than 4,500 square metres to use and enjoy your house properly, that extra land is also tax-free.

But there’s a catch. If you keep buying and selling houses that you live in, you might have to pay tax. This is to stop people from using this rule to avoid paying tax when they’re really in the business of buying and selling houses.

When deciding if you’re buying and selling houses too often, the law looks at you and people connected to you as a group. This includes people who live with you in these houses, and companies or trusts that you control.

Sections CB 6 to CB 11 explain more about when you might have to pay tax on selling land or property.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1512444.

Topics:
Money and consumer rights > Taxes
Housing and property > Buying and selling homes
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CB 16A: Main home exclusion for disposal within 2 years, or

“No tax on selling your main home within two years, with some exceptions”

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CB 17: Residential exclusion from sections CB 12 and CB 13, or

“Exceptions for work done on your residential land”

Part C Income
Income from business or trade-like activities: Exclusions for residential land

CB 16Residential exclusion from sections CB 6 to CB 11

  1. Sections CB 6 to CB 11 do not apply if—

  2. the person (person A)—
    1. acquired the land with a dwellinghouse on it; or
      1. acquired the land and erected a dwellinghouse on it; and
      2. the dwellinghouse was occupied mainly as a residence by,—
        1. person A:
          1. if members of person A’s family live with them, person A and members of person A’s family living with them:
            1. if person A is a trustee, 1 or more beneficiaries of the trust.

            2. The exclusion applies to the land that has the dwellinghouse on it. It also applies to land related to the land that has the dwellinghouse on it if the total area of the related land is—

            3. 4,500 square metres or less; or
              1. more than 4,500 square metres, if the larger area is required for the reasonable occupation and enjoyment of the dwellinghouse.

                1. The exclusion does not apply when—

                2. section CB 6(1) applies to the disposal; and
                  1. person A has engaged in a regular pattern of acquiring and disposing of land described in subsection (1).

                    1. For the purposes of subsection (3), in relation to land described in subsection (1), person A includes a group of persons if the requirements of subsection (5) are met.

                    2. For the purposes of subsection (4), a group of persons—

                    3. means 2 or more persons when together all of the persons occupy, or have occupied, land described in subsection (1); and
                      1. includes a person other than a natural person (the non-natural person), if another person referred to in paragraph (a) has significant involvement in, or control of, the activities of the non-natural person. For the avoidance of doubt, if the other person is able to direct, alone or as part of a group, the activities of the non-natural person, they have significant involvement in, or control of, the activities of the non-natural person.

                        Compare
                        Notes
                        • Section CB 16(1)(a): amended, on , by section 11(1)(a) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
                        • Section CB 16(1)(b): replaced (with effect on 1 April 2008), on , by section 123(1) (and see section 123(3) for application) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
                        • Section CB 16(1)(b)(i): amended, on , by section 11(1)(b) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
                        • Section CB 16(1)(b)(ii): amended, on , by section 11(1)(b) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
                        • Section CB 16(1)(b)(ii): amended, on , by section 11(1)(c) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
                        • Section CB 16(1)(b)(iii): amended, on , by section 11(1)(b) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
                        • Section CB 16(3) heading: replaced, on , by section 11(2) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
                        • Section CB 16(3): replaced, on , by section 11(2) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
                        • Section CB 16(4) heading: inserted, on , by section 11(2) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
                        • Section CB 16(4): inserted, on , by section 11(2) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
                        • Section CB 16(5) heading: inserted, on , by section 11(2) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
                        • Section CB 16(5): inserted, on , by section 11(2) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
                        • Section CB 16 list of defined terms group of persons: inserted, on , by section 11(3) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).