Plain language law

New Zealand law explained for everyone

Income Tax Act 2007

Income - Exempt income

CW 3C: Certain partitions or subdivisions of land

You could also call this:

“Tax rules for dividing shared land”

When you own land with other people and you split it up or divide it, you might get money for your share. This law tells you when that money is tax-free.

If you get a piece of land that’s worth at least 95% of what you paid for your share, including any costs for dividing or building on the land, then the money you get is tax-free.

If you get less than 95%, some of the money might still be tax-free. There’s a special calculation to work out how much. It looks at how much you paid compared to everyone else, and how much your new piece of land is worth compared to the whole land.

The law also explains what certain words mean. For example, ‘co-owner’ doesn’t just mean people. It can also mean companies you own shares in, or trusts you’re involved with.

Remember, this law is about dividing land you own with others. It’s not about buying or selling land to strangers.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=LMS837846.

Topics:

Money and consumer rights > Taxes

CW 3B: Pre-1990 forest land units: emissions trading scheme, or

“This section about pre-1990 forest land units in the emissions trading scheme has been removed”

CW 4: Annuities under life insurance policies, or

“Tax-free regular payments from certain life insurance policies”

Part C Income
Exempt income

CW 3CCertain partitions or subdivisions of land

An amount that a person who is a co-owner of land derives from disposing of land to another co-owner on a partition or subdivision is exempt income if the person’s proportion of the value of the land they receive on the partition or subdivision out of the total value of the land still held by persons who were co-owners, whether alone or jointly or in common with another person, is no less than 95% of their contribution to the cost of the land, including costs to subdivide, develop, and build on the land, as a proportion of the total cost.
If subsection (1) does not apply, an amount that a person who is a co-owner of land derives from disposing of land to another co-owner on a partition or subdivision is exempt income to the extent given by the following formula:
$amount derived – (total land value x (acquisition proportion – end value proportion)).$

Where:
The items in the formula are defined in subsections (4) to (7).
Amount derived is the amount a co-owner receives from the disposal of their interest in the land to another co-owner on a partition or subdivision.
Total land value is the total value of the land held by all persons who were co-owners, whether alone or jointly or in common with another person, at the end of the partition or subdivision.
Acquisition proportion is the person’s contribution to the cost of the land, including costs to subdivide, develop, and build on the land, as a proportion of the total cost.
End value proportion is the person’s proportion of the value of the land they receive, whether alone or jointly or in common with another person, on the partition or subdivision out of the total value of the land still held by persons who were co-owners.
Co-owner, in relation to land, includes a company in which the person is a shareholder, a person acting in their personal capacity, or their capacity as a trustee of a trust, partner in a partnership, or owner of a look-through company, even if they became a co-owner of the land in a different one of those capacities.

Notes

Section CW 3C: replaced (with effect on 27 March 2021), on 28 March 2024, by section 18 of the Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 (2024 No 11).