The Unitary Plan and Taxation of Re-Zoned Land

Publications > Tax Law

GST and services connected with land
_________________________________

Under the spot light by the IRD?
_________________________________

GST – Provision of Online Goods and Services
_________________________________

IRD’s Position on Tax Control Frameworks (OECD)
_________________________________

The Unitary Plan and Taxation of Re-Zoned Land
_________________________________

Associated Party Loans – IRD Documentation Requirements
_________________________________

Relationship Break Ups and Tax Tangles

The Unitary Plan and Taxation of Re-Zoned Land

There are 5 broad categories giving rise to the taxation of land transactions and include:

  1. Land acquired for the purpose or with the intention of disposal;
  2. Transactions involving dealers, developers and builders;
  3. Subdivision schemes commenced within 10 years of acquisition;
  4. Major development schemes: and
  5. Re-zoning gains within 10 years of acquisition.

Local government is attempting to re-zone large swathes of Auckland city to accommodate intensive housing to cope with population growth and current supply issues through the Proposed Auckland Unitary Plan (PAUP).

In light of the PAUP there are provisions in the Income Tax Act which may bring to tax gains made on the disposal of re-zoned land are particularly relevant to Auckland land owners.

How are land owners effected

In essence, gains derived from the disposal of land within 10 years of acquisition where at least 20% of the gains on the disposal are attributable to re-zoning or likely re-zoning may be brought to tax.

There are exclusions in relation to residential land where the person acquired the land and used, or intended to use it for residential purposes and where the person disposed of the land to another person who acquired it for residential purposes.

Residential purposes means the person has a purpose of using, or intending to use the land mainly as residence and includes land where it is contemplated that a dwelling will be erected for residential purposes.

Where re-zoning gains are brought to tax certain deductions are available which are based on the number of years the land was in the ownership of the land owner.

Comments

The scale of the PAUP is unprecedented and there will be a large numbers of taxpayers to which the re-zoning provisions could apply. At this stage we are unsure on how vigorously the Inland Revenue will apply these provisions in light of the PAUP and we await comment and or direction from the commissioner on this issue.

Contacts