Income Tax Act 2007

Income - Exempt income

CW 3C: Certain partitions or subdivisions of land

You could also call this:

"Dividing land you own with others: what you need to know about tax"

When you own land with others and you divide it, you might get some money. If you get money from dividing the land and your share of the land's value is at least 95% of what you paid for it, that money is not counted as income. You do not have to pay tax on it.

If your share of the land's value is less than 95% of what you paid for it, you use a formula to work out how much of the money you got is not counted as income. The formula is: the money you got minus the total value of the land multiplied by the difference between what you paid for it and what it is worth now.

You can find more information about income from land in sections CB 12 to CB 14. If you are treated as buying the land on a different date by section CB 15(2), that date is used instead.

Your end value proportion is the value of the land you get when it is divided, compared to the total value of the land. Your acquisition proportion is what you paid for the land, compared to the total cost.

If your end value proportion is not more than 105% of your acquisition proportion, the date you are treated as buying the land is the date you originally bought it. But if your end value proportion is more than 105%, the date you are treated as buying the land depends on whether it is the original land or additional land you got.

The bright-line start date for the land you get when it is divided is usually the same as the bright-line start date for the original land. But if the land was bought before 1 July 2024, the bright-line acquisition date is used instead.

The amount of money you get from dividing the land is called the amount derived. The total value of the land is the value of all the land that was owned by everyone before it was divided.

You are a co-owner of land if you own it with others, even if you own it through a company or a trust. You can be a co-owner in different ways, such as personally, as a trustee, or as a shareholder in a company.

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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.


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Part CIncome
Exempt income

CW 3CCertain partitions or subdivisions of land

  1. 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 end value proportion is no less than 95% of their acquisition proportion.

  2. 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 × (acquisition proportion − end value proportion)).

    Where:

    • For the purposes of the land provisions and sections CB 12 to CB 14 (which relate to income from disposals of land), if the person’s end value proportion is no more than 105% of their acquisition proportion, they are treated as acquiring the land they receive on the partition or subdivision on the date they acquired their interest in the undivided land or the date they are treated by section CB 15(2) (Transactions between associated persons) as acquiring their interest in the undivided land, whichever is earlier.

    • For the purposes of the land provisions and sections CB 12 to CB 14, if the person’s end value proportion is more than 105% of their acquisition proportion, they are treated as acquiring the land they receive on the partition or subdivision as follows:

    • for the original land, being the proportion of land remaining after the calculation in paragraph (b), on the date they acquired their interest in the undivided land or the date they are treated by section CB 15(2) as acquiring their interest in the undivided land, whichever is earlier:
      1. for the additional land, being the proportion of the land calculated using the following formula, on the date the person became entitled to the additional land or, to the extent the additional land is acquired from an associated person, the date they are treated by section CB 15(2) as acquiring the additional land:
        1. If the person’s end value proportion is no more than 105% of their acquisition proportion, their bright-line start date for the land they receive on the partition or subdivision is their bright-line start date for the undivided land.

        2. If the person’s end value proportion is more than 105% of their acquisition proportion, their bright-line start date for the land they receive on the partition or subdivision is as follows:

        3. for the original land, being the amount of land remaining after the calculation in paragraph (b), their bright-line start date for the undivided land:
          1. for the additional land, being the proportion of the land calculated using the following formula, the date the person became entitled to the additional land:
            1. For the purposes of subsections (5) and (6), if the undivided land was acquired before 1 July 2024, the bright-line acquisition date for the land is treated as the bright-line start date.

            2. 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.

            3. 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 total cost.

            4. Co-owner, in relation to land, includes a company in which the person is a shareholder, a person acting in their personal capacity, or a person acting in their capacity as a trustee of a trust, a partner in a partnership, or an owner of a look-through company, even if they became a co-owner of the land in a different one of those capacities.

            5. In the formulas in subsections (2), (4), and (6),—

            6. 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:
              1. 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:
                1. acquisition proportion has the same meaning as in subsection (8):
                  1. end value proportion has the same meaning as in subsection (7).
                    Notes
                    • Section CW 3C: replaced (with effect on 27 March 2021), on , by section 21(1) of the Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 (2025 No 9).
                    • Section CW 3C(5) heading: replaced (with effect on 1 July 2024), on , by section 21(2) of the Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 (2025 No 9).
                    • Section CW 3C(5): replaced (with effect on 1 July 2024), on , by section 21(2) of the Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 (2025 No 9).
                    • Section CW 3C(6) heading: replaced (with effect on 1 July 2024), on , by section 21(2) of the Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 (2025 No 9).
                    • Section CW 3C(6): replaced (with effect on 1 July 2024), on , by section 21(2) of the Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 (2025 No 9).
                    • Section CW 3C(6B) heading: inserted (with effect on 1 July 2024), on , by section 21(2) of the Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 (2025 No 9).
                    • Section CW 3C(6B): inserted (with effect on 1 July 2024), on , by section 21(2) of the Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 (2025 No 9).
                    • Section CW 3C list of defined terms bright-line start date: inserted (with effect on 1 July 2024), on , by section 21(3) of the Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 (2025 No 9).