Plain language law

New Zealand law explained for everyone

Income Tax Act 2007

Recharacterisation of certain transactions - Rollover relief from the bright-line test

FD 2: Relief from bright-line test for Māori rollover trusts

You could also call this:

“Exemptions for property transfers involving Māori trusts under the bright-line test”

This section of the law explains how the bright-line test for residential land works when property is transferred to, from, or between Māori rollover trusts. You need to know about this if you’re dealing with residential land and Māori trusts.

When residential land is transferred within the bright-line period, there are different rules depending on the type of transfer:

If you’re transferring land into a Māori rollover trust, you must be both a settlor and a beneficiary of the trust. The person receiving the land must be a trustee of the trust.

For transfers between Māori rollover trusts, both the giver and receiver must be trustees of their respective trusts. The beneficiaries of both trusts must be the same people.

When transferring land out of a Māori rollover trust, the giver must be a trustee and the receiver must be a settlor of the trust. The settlers must have originally given the land to the trustee and must be getting back the same amount of land they put in (or their share if someone has died). They also need to be beneficiaries of the trust.

When a transfer happens, it’s treated as if the land was sold and bought again. The price is set at whichever is higher: the cost of the land to the giver or the amount the receiver paid for it.

The start date for the bright-line period for the person receiving the land is the same as it was for the person giving the land.

A Māori rollover trust is a special kind of trust. Its trustee must be a Māori authority or able to become one. All the beneficiaries must be from the same iwi or hapu, or be descendants of the same tipuna. The land in the trust must be subject to Te Ture Whenua Maori Act 1993.

This text is automatically generated. It might be out of date or be missing some parts. Find out more about how we do this.

View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=LMS974735.

Topics:
Money and consumer rights > Taxes
Māori affairs > Māori land
Housing and property > Buying and selling homes
Previous

FD 1: Relief from bright-line test for transfers between associated persons, or

“Special tax rules for transferring residential land to close associates”

Next

FD 3: Certain transfers of residential land included in settlement of claim under Treaty of Waitangi, or

“Residential land transfers for Treaty settlements: Tax rules explained”

Part F Recharacterisation of certain transactions
Rollover relief from the bright-line test

FD 2Relief from bright-line test for Māori rollover trusts

  1. This section applies for the purposes of sections CB 6A and CB 16A (which relate to the bright-line test for residential land) and Part D (Deductions) when residential land is transferred within the bright-line period as described in the following table:

    The following table is small in size and contains 3 columns. The first column is headed Row. The second column is headed Transfer. The third column is headed Conditions to be satisfied.
    Row Transfer Conditions to be satisfied
    1 Transfers into a Māori rollover trust The transferor is a settlor and beneficiary of a Māori rollover trust; and
    The transferee is a trustee of the Māori rollover trust.
    2 Transfers between Māori rollover trusts The transferor is a trustee of a Māori rollover trust; and
    The transferee is a trustee of another Māori rollover trust; and
    The beneficiaries for both trusts are the same.
    3 Transfers out of a Māori rollover trust The transferor is the trustee of a Māori rollover trust; and
    The transferee is a settlor of the Māori rollover trust; and
    The settlors—
    a) originally transferred the land to the trustee; and
    b) acquired proportionally the same amount of land back from the trustee as they had originally transferred or, where one of the settlors has died, the settlors receive at least the same proportion of the land back from the trustee as they had originally transferred; and
    c) are beneficiaries of the trust.
    How to use this table: Read the columns from left to right according to the row that fits the situation. If the parties to the transfer meet the relevant conditions, then this section applies to them.

  2. For the purposes of subsection (1), the transferors and transferees may have different capacities in relation to the different conditions in that subsection (for example, a transferee may be a settlor in their personal capacity and a beneficiary as an owner of a look-through company).

  3. The transfer is treated as a disposal and acquisition, at the date of transfer, for an amount that equals the greater of the cost of the residential land to the transferor or the consideration paid by the transferee.

  4. The transferee’s bright-line start date for the land is the transferor’s bright-line start date.

  5. Māori rollover trust means, at the time of a relevant transfer to or from a relevant trust, a trust in which—

  6. a trustee of the trust is a Maori authority or eligible to elect to be a Maori authority; and
    1. all beneficiaries are—
      1. members of the same iwi or hapu:
        1. descendants of the same tipuna; and
        2. the land is subject to Te Ture Whenua Maori Act 1993.

          Notes
          • Section FD 2: inserted, on , by section 77(1) (and see section 77(2) for application) of the Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 (2024 No 11).