tax advice on property sale

[phillip30]

Hi All,

have own a rental for over 10 years, it may be that I can sell an area of the section to someone and the house seperately. Does anyone have any thoughts as to whether this triggers any tax issues?

Any feedback appreciated.

thanks

Phillip

[Rosco]

Hi Phillip,

1) are you a builder, developer or trader, or associated to one?

2) presume it was a long term hold, residential rental - seems obvious but there are some traders who have now held for close to 10 years as can't sell to cover costs

3) If no to question 1, and yes to question 2, then a small subdivision should be tax free capital gain. Specific exemption for property held over 10 years before any subdivision work is started, and as long as not a major subdivision with roads etc.

Ross

[Wayne]

what denotes a Major subdivision?

[Rosco]

Hi Wayne,

Really point iv gives you the answer to your question

CB 13 Disposal: amount from major development or division and not already in income

• Income
  
  (1) An amount that a person derives from disposing of land is income of the person if—
  
  • (a) the amount is not income under any of sections CB 6 to CB 12 and CB 14; and
  
  
  • (b) the amount is derived in the following circumstances:
    
    • (i) an undertaking or scheme, which is not necessarily in the nature of a business, is carried on; and
    
    
    • (ii) the undertaking or scheme involves the development of the land or the division of the land into lots; and
    
    
    • (iii) the person, or another person for them, carries on development or division work on or relating to the land; and
    
    
    • (iv) the development or division work involves significant expenditure on channelling, contouring, drainage, earthworks, kerbing, levelling, roading, or any other amenity, service, or work customarily undertaken or provided in major projects involving the development of land for commercial, industrial, or residential purposes.
  
  
  Exclusions
  
  (2) Subsection (1) is overridden by the exclusions for residential land in section CB 17, for business premises in section CB 20, for farm land in section CB 21, and for investment land in section CB 23.
  
  Relationship with section DB 27
  
  (3) Section DB 27 (Amount from major development or division and not already in income) deals with a deduction for the value of the land.
  
  Defined in this Act: amount, business, deduction, dispose, income, land
  Compare: 2004 No 35 s CB 11
  Section CB 13(2) heading: substituted, on 1 April 2008, by section 309 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
  Section CB 13(2): substituted, on 1 April 2008, by section 309 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

[phillip30]

thanks Rosco, that provides a lot more clarity and is different to what I thought