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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

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“Help with tax when Māori trusts buy or sell residential land”

When you dispose of residential land, you might have to pay tax. This rule applies to you if you are dealing with a Māori rollover trust and you are disposing of residential land in certain ways, such as to a Māori rollover trust or from one Māori rollover trust to another. You can find more information about the bright-line test in sections CB 6A and CB 16A.

If you dispose of land to a Māori rollover trust, you are the settlor and beneficiary of the trust, and the person you are transferring the land to is the trustee of the trust. You can also dispose of land from one Māori rollover trust to another if the beneficiaries of both trusts are the same. The land must be subject to Te Ture Whenua Maori Act 1993.

When you dispose of the land, it is treated as if you sold it for the greater of what you paid for it or what the buyer paid for it. The buyer’s bright-line start date for the land is the same as yours. If you bought the land before 1 July 2024, your bright-line acquisition date is used instead of your bright-line start date.

A Māori rollover trust is a special kind of trust where the trustee is a Maori authority, all the beneficiaries are related, and the land is subject to Te Ture Whenua Maori Act 1993. The beneficiaries must all be from the same iwi or hapū, or be descendants of the same tipuna.

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

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

"Some sales of homes to family or friends don't have to follow the bright-line test rules."

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

"Selling residential land as part of a Treaty of Waitangi settlement has special tax rules."

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 disposed of as described in the following table:

    The following table is small in size and has 3 columns. Column is headed Row. Column 2 is headed Disposal. Column 3 is headed Conditions to be satisfied.
    Row Disposal Conditions to be satisfied
    1 Disposal to 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 Disposal from one Māori rollover trust to another 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 Disposal by 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, when 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 disposal 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 disposal is treated as a disposal and acquisition, at the date of disposal, 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. For the purposes of subsection (4), if the transferor acquired the land before 1 July 2024, the transferor’s bright-line acquisition date is treated as a bright-line start date.

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

  7. 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 hapū:
        1. descendants of the same tipuna; and
        2. the land is subject to Te Ture Whenua Maori Act 1993.

          Notes
          • Section FD 2: replaced (with effect on 1 July 2024), on , by section 61(1) (and see section 61(2) for application) of the Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 (2025 No 9).