Income Tax Act 2007

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

GB 53C: On-lending at lower rate

You could also call this:

"Lending money to family or friends at a lower interest rate to avoid tax rules"

You borrow money and lend it to someone you are associated with at a lower rate. This happens when the associated person owns certain residential property and the arrangement is to avoid the rules in subpart DH. The interest you pay is calculated using the lower rate, not the higher rate you borrowed at, for the purposes of Part D.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=LMS684941.

This page was last updated on 29 January 2026 — View changes

Topics:

Money and consumer rights > TaxesMoney and consumer rights > Banking and loans

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GB 54: Arrangements involving establishments, or

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

GB 53COn-lending at lower rate

This section applies when, under an arrangement, a person borrows money and on-lends it to an associated person at a lower rate than that at which the person borrowed it, if—
the associated person, or a person associated with the associated person, owns disallowed residential property; and
the arrangement has a purpose or effect, not being a merely incidental purpose or effect, of defeating the intent and application of subpart DH (Interest incurred in relation to certain land).

The amount of interest incurred by the person for the purposes of Part D is limited to and calculated using the lower rate. The higher rate is ignored.

Notes

Section GB 53C: inserted (with effect on 27 March 2021), on 30 March 2022, by section 112 of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).