Profits from rezoning taxed?

[Eugene]

Does anyone know if profits from rezoning are taxed on sale of the property?
And if so under what circumstances?
I should think it would be hard to calculate
But I think there used to be such a provision in the Tax Act

http://www.landlords.co.nz/article/5594/zone-changes-may-be-windfall-for-investors?utm_source=GR&utm_medium=email&utm_campaign=Rezoning+windfall%3F+

[PTILoveYou]

Unless IRD changes the tax act, it all comes down to intention of purchase.

More tax = more cost on developments = bad for affordable new housing

[Eugene]

Unless IRD changes the tax act, it all comes down to intention of purchase.

More tax = more cost on developments = bad for affordable new housing

Purpose or intention is only one of the ways you can be taxed on the gain on sale.
There is also being a trader (repetition), profits from subdivision.
Don't believe me though I don't work in this field and it is many years since I was familiar with it.
I am sure it is in Matthew's book but I lent this to someone big mistake

[Perry]

I am sure it is in Matthew's book but I lent this to someone big mistake

Nah - the mistake was forgetting who you lent it to.

[Anthonyacat]

The 'rezoning tax' you refer to is very real, and refers to section CB 14 of the Income Tax Act 2007: http://www.legislation.govt.nz/act/p...LM1512437.html

Basically, the answer is yes. The gain is taxable if certain criteria are met, and certain exclusions do not apply.

Your #1 exclusion is CB14(1)(b); if you own the property for more than 10 years, then you're safe.
Your #2 exclusion is CB18; purchasing the property with the intention to live in it yourself, AND selling it to someone else who intends to live in it themselves.
Your #3 exclusion is CB22; purchasing the property with the intention to use it as a farm, AND selling it to someone else who intends to use it as a farm themselves.

One criteria in CB14 that's much harder to determine is whether the rezoning had an impact more than 20%. If you can prove it was less than 20%, you're also safe. But this brings you to the 'hard to calculate' problem. And it can be. Really hard. As always, the key is documentation to the sky and beyond. If you are worried, get a professional valuation done; but of course can be hard to get one done 'before' and 'after'. While I don't know for sure, someone probably specialises in this sort of thing. If they don't, that's a nice little niche market for a specialist valuer to grab.

Other than that, you're pretty much caught. But as always speak to a property-specialist Chartered Accountant. This is the sort of minor complexity that trips up generalist firms.


I anticipate this will come up quite a lot as Auckland's Unitary Plan flows through, so its some damned important law. Comments like the "it's all about intention" above show that even those active in property forums (presumably a subsection of the most knowledgeable in the country) are ignorant of the extent of tax law, and show the value of a good property focussed CA.

[Eugene]

The 'rezoning tax' you refer to is very real, and refers to section CB 14 of the Income Tax Act 2007: http://www.legislation.govt.nz/act/p...LM1512437.html

Basically, the answer is yes. The gain is taxable if certain criteria are met, and certain exclusions do not apply.

Your #1 exclusion is CB14(1)(b); if you own the property for more than 10 years, then you're safe.
Your #2 exclusion is CB18; purchasing the property with the intention to live in it yourself, AND selling it to someone else who intends to live in it themselves.
Your #3 exclusion is CB22; purchasing the property with the intention to use it as a farm, AND selling it to someone else who intends to use it as a farm themselves.

One criteria in CB14 that's much harder to determine is whether the rezoning had an impact more than 20%. If you can prove it was less than 20%, you're also safe. But this brings you to the 'hard to calculate' problem. And it can be. Really hard. As always, the key is documentation to the sky and beyond. If you are worried, get a professional valuation done; but of course can be hard to get one done 'before' and 'after'. While I don't know for sure, someone probably specialises in this sort of thing. If they don't, that's a nice little niche market for a specialist valuer to grab.

Other than that, you're pretty much caught. But as always speak to a property-specialist Chartered Accountant. This is the sort of minor complexity that trips up generalist firms.


I anticipate this will come up quite a lot as Auckland's Unitary Plan flows through, so its some damned important law. Comments like the "it's all about intention" above show that even those active in property forums (presumably a subsection of the most knowledgeable in the country) are ignorant of the extent of tax law, and show the value of a good property focussed CA.

Absolutely imperative not to do ANY transactions or consents or restructure without first checking with an expert accountant.