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Income Tax Act 2007

Income - Income from business or trade-like activities - Exclusion for land acquired from a co-owner on a partition or subdivision

CB 15E: Disposals of land subject to section CW 3C

You could also call this:

“Tax rules for selling land you got from dividing shared property”

This law applies to you if you sell land that you got from dividing it with someone else who owned it with you. It’s about when you make money from this sale.

You can use this law if you weren’t in business with anyone who develops land or divides land into smaller pieces when you first got your part of the land.

If the value of the land you got isn’t much more than what you started with (no more than 5% more), you don’t have to pay tax on the money you make from selling it.

If the value has gone up by more than 5%, you still might not have to pay tax on all the money you make. There’s a special calculation to work out how much of the money you don’t have to pay tax on.

The calculation looks at how much the land was worth when you first got it, compared to how much it’s worth now. It uses this to figure out how much of the money you make from selling the land you don’t have to pay tax on.

If you’re part of a group of companies that are all owned by the same people, or if you’re part of a consolidated group, this law can also stop some money from being counted as income for your 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=LMS952988.

Topics:

Money and consumer rights > Taxes

CB 15D: Kāinga Ora–Homes and Communities and wholly-owned group, or

“Tax rules for Kāinga Ora and its fully owned companies”

CB 16A: Main home exclusion for disposal within 2 years, or

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

Part C Income
Income from business or trade-like activities: Exclusion for land acquired from a co-owner on a partition or subdivision

CB 15EDisposals of land subject to section CW 3C

This section applies to a person for a disposal of land acquired from a co-owner on a partition or subdivision if—
the person derives income from the disposal under section CB 10(2) or CB 15(1); and
at the time the person originally acquired their interest in the land that was partitioned or subdivided, the person was not associated with a person that carried on a business of developing land or dividing land into lots.

The amount of income the person derives under section CB 10(2) or CB 15(1) from disposing of the land is exempt income if the person’s end value proportion under section CW 3C (Certain partitions or subdivisions of land) is no more than 105% of their acquisition proportion under section CW 3C.
If subsection (2) does not apply, the amount of income the person derives under section CB 10(2) or CB 15(1) from disposing of the land is reduced by the amount calculated by the formula—
$amount derived x (acquisition proportion ÷ end value proportion).$

Where:
The items in the formula are defined in subsections (5) to (7).
Amount derived is the amount the person derives from disposing of the land.
Acquisition proportion is the person’s acquisition proportion as described in section CW 3C.
End value proportion is the person’s end value proportion as described in section CW 3C.
If subsection (2) or (3) applies to prevent an amount from being income of a person who is a member of a wholly-owned group of companies or a consolidated group, the amount is not income of the person under section CV 1 or CV 2 (which apply to group companies and consolidated groups).

Notes

Section CB 15E: inserted (with effect on 27 March 2021), on 28 March 2024, by section 11 of the Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 (2024 No 11).