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Income Tax Act 2007

Avoidance and non-market transactions - Avoidance: specific - Arrangements involving residential land

GB 53: Arrangements involving residential land: trusts

You could also call this:

"Rules for trusts that own homes or residential land in New Zealand"

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This section is about trusts that own residential land. You need to know when a trust owns residential land directly or indirectly and this land is 50% or more of the trust's assets. The rules also apply when the trust's rules change, or a decision-maker under the trust changes, or an arrangement under the trust changes, with a purpose or effect of defeating the intent and application of section CB 6A or CZ 39, which relate to the bright-line test for residential land. When a change like this happens, the trustees are treated as selling the residential land for its market value at the time of the change. This means the trustees have to consider the market value of the land when the change occurs. You should be aware that this rule applies to the residential land affected by the change. The market value is the amount of money the land is worth at the time of the change. The trustees have to use this value when they are working out what has happened to the land. This is an important part of how the rules work for trusts that own residential land.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM6663160.

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Part GAvoidance and non-market transactions
Avoidance: specific: Arrangements involving residential land

GB 53Arrangements involving residential land: trusts

  1. This section applies when—

  2. the trustees of a trust own residential land directly or indirectly (trust residential land); and
    1. trust residential land makes up 50% or more, by market value, of the assets of the trust; and
      1. the trust’s trust deed changes, a decision-maker under the trust deed changes, or an arrangement under the trust changes, with a purpose or effect of defeating the intent and application of section CB 6A or CZ 39 (which relate to the bright-line test for residential land).

        1. The trustees are treated as disposing of the trust residential land affected by a change described in subsection (1)(c) for an amount of consideration equal to the market value of the land at the time of the change.

        Notes
        • Section GB 53: inserted (with effect on 1 October 2015), on , by section 18 of the Taxation (Bright-line Test for Residential Land) Act 2015 (2015 No 111).
        • Section GB 53(1)(c): amended (with effect on 27 March 2021), on , by section 79 of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).