Land Flashcards
1
Q
What section of the ITA deal with disposals of land within two years?
A
Section CB 6A
2
Q
What is section CB 6A of the ITA otherwise known as?
A
The Bright-line test for Residential land (“the bright-line test”).
3
Q
When did the bright-line test come into force?
A
1 October 2015
4
Q
When does the bright-line test apply?
A
When a person acquires their estate or interest in land after 1 October 2015.
5
Q
How is the definition of “dwelling” in section YA 1 of the ITA modified for the bright-line test?
A
By including serviced apartments but excluding rest homes and retirement villages.
6
Q
What sub part deals of the ITA with RLWT?
A
Sub Part RL
7
Q
What section imposes RLWT?
A
Section RL 1
8
Q
Other than disposal of land within 2 years, what other requirement is there for section RL 1 to apply?
A
The vendor must be an offshore RLWT person.
9
Q
Who collects the RLWT?
A
The vendor’s conveyancer.
10
Q
Who is a conveyancer for the purposes of RLWT?
A
A lawyer, incorporated law firm, conveyancing practitioner or incorporated conveyancing firm providing conveyancing services.
11
Q
Where is the term “conveyancing services” defined for the purposes of the ITA?
A
Lawyers and Conveyancers Act 2006.
12
Q
How is the RLWT rate calculated for use in the first method of RLWT calculation?
A
RLWT * the top individual marginal tax rate (33%) or if a company, the company tax rate (28%).
13
Q
Extension of the bright-line test for residential property
From _________________, the bright-line test that is used to determine if you have tax to pay on the sale of residential property has changed.
If you entered into an agreement to purchase residential property on or after 29 March 2018 and sell it within 5 years, you’ll need to consider if it is taxable under the bright-line test. If a property was purchased on or after 1 October 2015 through to 28 March 2018, the bright-line test will look at whether the property was sold within 2 years.
https://www.ird.govt.nz/news-updates/brightline-extension.html
A
29 March 2018
14
Q
Extension of the ____________ for residential property
From 29 March 2018, the _____________ that is used to determine if you have tax to pay on the sale of residential property has changed.
If you entered into an agreement to purchase residential property on or after 29 March 2018 and sell it within 5 years, you’ll need to consider if it is taxable under the bright-line test. If a property was purchased on or after 1 October 2015 through to 28 March 2018, the bright-line test will look at whether the property was sold within 2 years.
https://www.ird.govt.nz/news-updates/brightline-extension.html
A
bright-line test
15
Q
Extension of the bright-line test for residential property
From 29 March 2018, the bright-line test that is used to determine if you have tax to pay on the sale of residential property has changed.
If you entered into an agreement to _________________ on or after 29 March 2018 and sell it within 5 years, you’ll need to consider if it is taxable under the bright-line test. If a property was purchased on or after 1 October 2015 through to 28 March 2018, the bright-line test will look at whether the property was sold within 2 years.
https://www.ird.govt.nz/news-updates/brightline-extension.html
A
purchase residential property
16
Q
Extension of the bright-line test for residential property
From 29 March 2018, the bright-line test that is used to determine if you have tax to pay on the sale of residential property has changed.
If you entered into an agreement to purchase residential property on or after 29 March 2018 and sell it within 5 years, you’ll need to consider if it is taxable under the bright-line test. If a property was purchased on or after _________________________, the bright-line test will look at whether the property was sold within 2 years.
https://www.ird.govt.nz/news-updates/brightline-extension.html
A
on or after 1 October 2015 through to 28 March 2018
17
Q
Extension of the bright-line test for residential property
From 29 March 2018, the bright-line test that is used to determine if you have tax to pay on the sale of residential property has changed.
If you entered into an agreement to purchase residential property on or after 29 March 2018 and sell it within 5 years, you’ll need to consider if it is taxable under the bright-line test. If a property was purchased on or after 1 October 2015 through to 28 March 2018, the bright-line test will look at whether the property was sold within ____________.
https://www.ird.govt.nz/news-updates/brightline-extension.html
A
2 years
18
Q
Extension of the _________________________
From 29 March 2018, the bright-line test that is used to determine if you have tax to pay on the sale of residential property has changed.
If you entered into an agreement to purchase residential property on or after 29 March 2018 and sell it within 5 years, you’ll need to consider if it is taxable under the bright-line test. If a property was purchased on or after 1 October 2015 through to 28 March 2018, the bright-line test will look at whether the property was sold within 2 years.
https://www.ird.govt.nz/news-updates/brightline-extension.html
A
bright-line test for residential property
19
Q
The bright-line test was enacted by the previous Government in 2015 and applies to the disposal of residential land acquired after 1 October 2015.
The definition of “residential land” includes:
• __________________;
• land for which the owner has an arrangement that relates to erecting a dwelling; or
• bare land that may be used for erecting a dwelling under rules in the relevant operative district plan
The definition does not include land that is:
• used predominantly as business premises; or
• farmland
https://tompkinswake.co.nz/insights/knowledge/bright-line-test-extended-to-5-years/
A
land that has a dwelling on it
20
Q
The bright-line test was enacted by the previous Government in 2015 and applies to the disposal of residential land acquired after 1 October 2015.
The definition of “residential land” includes:
• land that has a dwelling on it;
• land for which the owner has an _______________________; or
• bare land that may be used for erecting a dwelling under rules in the relevant operative district plan
The definition does not include land that is:
• used predominantly as business premises; or
• farmland
https://tompkinswake.co.nz/insights/knowledge/bright-line-test-extended-to-5-years/
A
arrangement that relates to erecting a dwelling
21
Q
The bright-line test was enacted by the previous Government in 2015 and applies to the disposal of residential land acquired after 1 October 2015.
The definition of “residential land” includes:
• land that has a dwelling on it;
• land for which the owner has an arrangement that relates to erecting a dwelling; or
• ________________________ under rules in the relevant operative district plan
The definition does not include land that is:
• used predominantly as business premises; or
• farmland
https://tompkinswake.co.nz/insights/knowledge/bright-line-test-extended-to-5-years/
A
bare land that may be used for erecting a dwelling
22
Q
The bright-line test was enacted by the previous Government in 2015 and applies to the disposal of residential land acquired after 1 October 2015.
The definition of “residential land” includes:
• land that has a dwelling on it;
• land for which the owner has an arrangement that relates to erecting a dwelling; or
• bare land that may be used for erecting a dwelling ________________________
The definition does not include land that is:
• used predominantly as business premises; or
• farmland
https://tompkinswake.co.nz/insights/knowledge/bright-line-test-extended-to-5-years/
A
under rules in the relevant operative district plan
23
Q
The bright-line test was enacted by the previous Government in 2015 and applies to the disposal of residential land acquired after 1 October 2015.
The definition of “residential land” includes:
• land that has a dwelling on it;
• land for which the owner has an arrangement that relates to erecting a dwelling; or
• bare land that may be used for erecting a dwelling under rules in the relevant operative district plan
The definition does not include land that is:
• __________________________; or
• farmland
https://tompkinswake.co.nz/insights/knowledge/bright-line-test-extended-to-5-years/
A
used predominantly as business premises
24
Q
The bright-line test was enacted by the previous Government in 2015 and applies to the disposal of residential land acquired after 1 October 2015.
The definition of “residential land” includes:
• land that has a dwelling on it;
• land for which the owner has an arrangement that relates to erecting a dwelling; or
• bare land that may be used for erecting a dwelling under rules in the relevant operative district plan
The definition does not include land that is:
• used predominantly as business premises; or
• _______________
https://tompkinswake.co.nz/insights/knowledge/bright-line-test-extended-to-5-years/
A
farmland
25
The application of the bright line test is subject to specific exemptions, including:
• ______________ (subject to restrictions);
• transfers under a relationship property agreement; and
• disposals by executors/administrators or by beneficiaries of an estate.
https://tompkinswake.co.nz/insights/knowledge/bright-line-test-extended-to-5-years/
main dwellings
26
The application of the bright line test is subject to specific exemptions, including:
• main dwellings (subject to restrictions);
• __________________________; and
• disposals by executors/administrators or by beneficiaries of an estate.
https://tompkinswake.co.nz/insights/knowledge/bright-line-test-extended-to-5-years/
transfers under a relationship property agreement
27
The application of the bright line test is subject to specific exemptions, including:
• main dwellings (subject to restrictions);
• transfers under a relationship property agreement; and
• ____________________________________________.
https://tompkinswake.co.nz/insights/knowledge/bright-line-test-extended-to-5-years/
disposals by executors/administrators or by beneficiaries of an estate
28
Main Home Exclusion
Generally, exclusion to the bright line test applies if the residential property being sold has predominantly been the main home of the seller (and the seller does not have ___________________________________).
The main home exclusion can also apply if the residential property is owned by a trust and is the main home of the settlor of that trust.
Exclusions to the bright line test can also apply where a residential property is transferred as part of an inheritance or as part of a relationship property agreement.
https://www.al.nz/residential-property-bright-line-test-extended/
a history of buying and selling properties
29
Main Home Exclusion
Generally, exclusion to the bright line test applies if the residential property being sold has predominantly been the main home of the seller (and the seller does not have a history of buying and selling properties).
The main home exclusion can also apply if the residential property ___________________ and is the main home of the settlor of that trust.
Exclusions to the bright line test can also apply where a residential property is transferred as part of an inheritance or as part of a relationship property agreement.
https://www.al.nz/residential-property-bright-line-test-extended/
is owned by a trust
30
Main Home Exclusion
Generally, exclusion to the bright line test applies if the residential property being sold has predominantly been the main home of the seller (and the seller does not have a history of buying and selling properties).
The main home exclusion can also apply if the residential property is owned by a trust and _____________________________.
Exclusions to the bright line test can also apply where a residential property is transferred as part of an inheritance or as part of a relationship property agreement.
https://www.al.nz/residential-property-bright-line-test-extended/
is the main home of the settlor of that trust
31
Main Home Exclusion
Generally, exclusion to the bright line test applies if the residential property being sold has predominantly been the main home of the seller (and the seller does not have a history of buying and selling properties).
The main home exclusion can also apply if the residential property ________________________________________.
Exclusions to the bright line test can also apply where a residential property is transferred as part of an inheritance or as part of a relationship property agreement.
https://www.al.nz/residential-property-bright-line-test-extended/
is owned by a trust and is the main home of the settlor of that trust.
32
Not all large areas of rural land will automatically be treated as farmland though. To determine whether land is capable of being worked requires looking at the ________________ at the time of sale. Land that requires significant investment or modification to be used as a farming business would therefore not qualify. Inland Revenue provided an example of a 50 hectare plot of land that is covered in gorse or bush. The land is not farmland as it is not currently capable of being used for farming purposes. Therefore if this particular piece of land contained a house and was brought and sold within two years the bright-line test would apply and any gain would be taxable.
https://www.cooperaitken.co.nz/wp-content/uploads/2017/10/the_balance_sheet_Sept_2017-FINAL-2.pdf
capability of the land
33
Not all large areas of rural land will automatically be treated as farmland though. To determine whether land is capable of being worked requires looking at the capability of the land _____________. Land that requires significant investment or modification to be used as a farming business would therefore not qualify. Inland Revenue provided an example of a 50 hectare plot of land that is covered in gorse or bush. The land is not farmland as it is not currently capable of being used for farming purposes. Therefore if this particular piece of land contained a house and was brought and sold within two years the bright-line test would apply and any gain would be taxable.
https://www.cooperaitken.co.nz/wp-content/uploads/2017/10/the_balance_sheet_Sept_2017-FINAL-2.pdf
at the time of sale
34
Not all large areas of rural land will automatically be treated as farmland though. To determine whether land is capable of being worked requires looking at the ____________________. Land that requires significant investment or modification to be used as a farming business would therefore not qualify. Inland Revenue provided an example of a 50 hectare plot of land that is covered in gorse or bush. The land is not farmland as it is not currently capable of being used for farming purposes. Therefore if this particular piece of land contained a house and was brought and sold within two years the bright-line test would apply and any gain would be taxable.
https://www.cooperaitken.co.nz/wp-content/uploads/2017/10/the_balance_sheet_Sept_2017-FINAL-2.pdf
capability of the land at the time of sale
35
Not all large areas of rural land will automatically be treated as farmland though. To determine whether land is capable of being worked requires looking at the capability of the land at the time of sale. Land that requires significant investment or modification to be used as a farming business would therefore not qualify. Inland Revenue provided an example of a 50 hectare plot of land that is covered in gorse or bush. The land is not farmland as it is not currently capable of being used for farming purposes. Therefore if this particular piece of land ____________ and was brought and sold within two years the bright-line test would apply and any gain would be taxable.
https://www.cooperaitken.co.nz/wp-content/uploads/2017/10/the_balance_sheet_Sept_2017-FINAL-2.pdf
contained a house
36
The subdivision and sale of the land from a property within 2 years would also be automatically captured under the bright-line test. A sale of a _____________ would not be able to apply the farming, nor main home exemption. However, the subdivision and sale of an existing farm dwelling may be able to apply the main home exclusion depending on the use of the dwelling over the time of ownership.
https://www.cooperaitken.co.nz/wp-content/uploads/2017/10/the_balance_sheet_Sept_2017-FINAL-2.pdf
bare section
37
The subdivision and sale of the land from a property within 2 years would also be automatically captured under the bright-line test. A sale of a bare section would not be able to apply the farming, nor main home exemption. However, the subdivision and sale of an existing farm dwelling may be able to apply the ________________ depending on the use of the dwelling over the time of ownership.
https://www.cooperaitken.co.nz/wp-content/uploads/2017/10/the_balance_sheet_Sept_2017-FINAL-2.pdf
main home exclusion
38
The subdivision and sale of the land from a property within 2 years would also be automatically captured under the bright-line test. A sale of a bare section would not be able to apply the farming, nor main home exemption. However, the subdivision and sale of an existing farm dwelling may be able to apply the main home exclusion depending on ________________ over the time of ownership.
https://www.cooperaitken.co.nz/wp-content/uploads/2017/10/the_balance_sheet_Sept_2017-FINAL-2.pdf
the use of the dwelling
39
Care is also needed for residential property that is owned in a trust. The main home exemption should be able to be applied to most simple trust situations. But where the principal settlor of the trust is not living in the property then the exemption cannot be applied. An example of this could be where a trust settled by the parents purchases a unit for their daughter to live in while at university. As the parents, the settlors of the trust, are not _____________ they are unable to apply the main home exemption for any gain made if purchased and sold within two years.
https://www.cooperaitken.co.nz/wp-content/uploads/2017/10/the_balance_sheet_Sept_2017-FINAL-2.pdf
living in the property
40
Care is also needed for residential property that is owned in a trust. The main home exemption should be able to be applied to most simple trust situations. But where the principal settlor of the trust is not living in the property then the exemption cannot be applied. An example of this could be where a trust settled by the parents purchases a unit for their daughter to live in while at university. As the parents, the settlors of the trust, are not living in the property they are unable to apply the ________________ for any gain made if purchased and sold within two years.
https://www.cooperaitken.co.nz/wp-content/uploads/2017/10/the_balance_sheet_Sept_2017-FINAL-2.pdf
main home exemption
41
________________ (RLWT)
The RLWT criteria has changed as a result of the extension of the bright-line test. From 29 March 2018, the sale of New Zealand residential property by an offshore RLWT person may now be required to have RLWT withheld if it is sold within 5 years of purchase. This will only apply to properties where an agreement to purchase was entered into on or after 29 March 2018.
https://www.ird.govt.nz/news-updates/brightline-extension.html
Residential land withholding tax
42
The RLWT criteria has changed as a result of the extension of the bright-line test. From 29 March 2018, the sale of New Zealand residential property by an offshore RLWT person may now be required to have RLWT withheld if it is sold _______________. This will only apply to properties where an agreement to purchase was entered into on or after 29 March 2018.
https://www.ird.govt.nz/news-updates/brightline-extension.html
within 5 years of purchase
43
Residential land withholding tax (RLWT)
The RLWT criteria has changed as a result of the extension of the bright-line test. From 29 March 2018, the sale of New Zealand residential property by an offshore RLWT person may now be required to have RLWT withheld if it is sold within 5 years of purchase. This will only apply to properties where an agreement to purchase was entered into on or after _______________.
https://www.ird.govt.nz/news-updates/brightline-extension.html
29 March 2018.
44
29 March 2018.
Residential land withholding tax (RLWT)
The RLWT criteria has changed as a result of the extension of the bright-line test. From 29 March 2018, the sale of New Zealand residential property by an offshore RLWT person may now be required to have RLWT withheld if it is sold within 5 years of purchase. This will only apply to properties where an agreement to purchase was entered into on or after 29 March 2018.
With this extension, RLWT will apply if:
• a sale amount is paid or payable on or after 1 July 2016, and
• the property sold is New Zealand residential land, and
• the seller:
o has purchased the property on or after 1 October 2015 through to 28 March 2018 inclusive, and owned the property for less than two years before selling, or
o has purchased the property on or after 29 March 2018 and owned the property for less than five years before selling, and
o is an ___________________.
https://www.ird.govt.nz/news-updates/brightline-extension.html
is an offshore RLWT person
45
As the RLWT is primarily a _______________ for the bright-line test, the RLWT follows as closely as possible the concepts used in the bright-line test. However, there are some instances where the framework departs from that of the bright-line test to ensure that the RLWT is able to be administered by agents
TIB Vo 28 No 6
collection mechanism
46
As the RLWT is primarily a collection mechanism for the ______________, the RLWT follows as closely as possible the concepts used in the bright-line test. However, there are some instances where the framework departs from that of the bright-line test to ensure that the RLWT is able to be administered by agents
TIB Vo 28 No 6
bright-line test
47
As the RLWT is primarily a ______________________, the RLWT follows as closely as possible the concepts used in the bright-line test. However, there are some instances where the framework departs from that of the bright-line test to ensure that the RLWT is able to be administered by agents
TIB Vo 28 No 6
collection mechanism for the bright-line test
48
The bright-line test does not apply to a person’s main home. A person can only have one main home. If a person has more than ____________, their main home is the one with which the person has the greatest connection.
TIB Vol 28 No 1
one home
49
The bright-line test does not apply to a person’s main home. A person can only have one main home. If a person has more than one home, their main home is the one with which the person has the ________________.
TIB Vol 28 No 1
the greatest connection
50
The bright-line test does not apply to property acquired through an _________________. There is rollover relief for property transferred as a result of a relationship property agreement. This means that any potential tax liability will be deferred until a subsequent sale
TIB Vol 28 No 1
inheritance
51
The bright-line test does not apply to property acquired through an inheritance. There is _____________for property transferred as a result of a relationship property agreement. This means that any potential tax liability will be deferred until a subsequent sale
TIB Vol 28 No 1
rollover relief
52
The bright-line test does not apply to property acquired through an inheritance. There is rollover relief for property transferred as a result of a __________________. This means that any potential tax liability will be deferred until a subsequent sale
TIB Vol 28 No 1
relationship property agreement
53
Taxpayers ____________ allowed deductions according to ordinary tax rules for property that is subject to the bright-line test.
TIB Vol 28 No 1
will be
54
Taxpayers will be allowed de____________ according to ordinary tax rules for property that is subject to the bright-line test.
TIB Vol 28 No 1
deductions
55
Taxpayers will be allowed deductions according to _______________ for property that is subject to the bright-line test.
TIB Vol 28 No 1
ordinary tax rules
56
__________ arising from the bright-line test will be ring-fenced so that they may only be used to offset taxable gains from other land sales.
TIB Vol 28 No 1
Losses
57
Losses arising from the __________ will be ring-fenced so that they may only be used to offset taxable gains from other land sales.
TIB Vol 28 No 1
bright-line test
58
Losses arising from the bright-line test will be _________ so that they may only be used to offset taxable gains from other land sales.
TIB Vol 28 No 1
ring-fenced
59
Losses arising from the bright-line test will be ring-fenced so that they may only be used to _____________ from other land sales.
TIB Vol 28 No 1
offset taxable gains
60
Losses arising from the bright-line test will be ring-fenced so that they may only be used to offset taxable gains from ______________.
TIB Vol 28 No 1
other land sales
61
Dwelling The first criterion includes land that has a dwelling on it. The definition of “dwelling” is the same as that currently used in the Income Tax Act 2007 and the Goods and Services Tax Act 1985. However, there are two adjustments to the definition of “dwelling” for the purposes of the bright-line test. The first adjustment includes ________________ within the definition of “residential land”, while the second excludes all rest homes and retirement villages from the definition
TIB Vol 28 No 1
serviced apartments
62
Dwelling The first criterion includes land that has a dwelling on it. The definition of “dwelling” is the same as that currently used in the Income Tax Act 2007 and the Goods and Services Tax Act 1985. However, there are two adjustments to the definition of “dwelling” for the purposes of the bright-line test. The first adjustment includes serviced apartments within the definition of “residential land”, while the second excludes all _________________ from the definition
TIB Vol 28 No 1
rest homes and retirement villages
63
Dwelling The first criterion includes land that has a dwelling on it. The definition of “dwelling” is the same as that currently used in the Income Tax Act 2007 and the Goods and Services Tax Act 1985. However, there are two adjustments to the definition of “dwelling” for the purposes of the bright-line test. The first adjustment includes ________________ within the definition of “residential land”, while the second excludes all rest homes and retirement villages from the definition
TIB Vol 28 No 1
serviced apartments
64
Dwelling The first criterion includes land that has a dwelling on it. The definition of “dwelling” is the same as that currently used in the Income Tax Act 2007 and the Goods and Services Tax Act 1985. However, there are two adjustments to the definition of “dwelling” for the purposes of the bright-line test. The first adjustment includes serviced apartments within the definition of “residential land”, while the second excludes all _________________ from the definition
TIB Vol 28 No 1
rest homes and retirement villages
65
The second criterion means that the bright-line test covers land that does not have a dwelling on it at present but there is a plan or understanding to build a dwelling on it. For example, this criterion __________ when the owner of a commercial office has an arrangement to convert it into dwellings.
TIB Vol 28 No 1
would apply
66
The second criterion means that the bright-line test covers land that does not have a dwelling on it at present but there is a plan or understanding to build a dwelling on it. For example, this criterion would apply when the owner of a commercial office has an arrangement to convert it into ___________.
TIB Vol 28 No 1
dwellings
67
Example: Development Andrew buys an empty plot of land that is zoned for residential purposes. He plans to develop the plot by subdividing it into four lots and building houses on each of the lots. Andrew sells lot 1 “off the plan” to Bob. One month later, Bob sells lot 1 to Carla. Lot 1 would be “residential land” and Bob’s sale _____________ subject to the bright-line test. This is because there is an arrangement to build a dwelling on the land, and because it is bare land that can have a dwelling erected on it under the relevant district plan
TIB Vol 28 No 1
would be
68
Example: Development Andrew buys an empty plot of land that is zoned for residential purposes. He plans to develop the plot by subdividing it into four lots and building houses on each of the lots. Andrew sells lot 1 “off the plan” to Bob. One month later, Bob sells lot 1 to Carla. Lot 1 would be “residential land” and Bob’s sale would be subject to the bright-line test. This is because there is an an _______________________ on the land, and because it is bare land that can have a dwelling erected on it under the relevant district plan
TIB Vol 28 No 1
arrangement to build a dwelling
69
Example: Development Andrew buys an empty plot of land that is zoned for residential purposes. He plans to develop the plot by subdividing it into four lots and building houses on each of the lots. Andrew sells lot 1 “off the plan” to Bob. One month later, Bob sells lot 1 to Carla. Lot 1 would be “residential land” and Bob’s sale would be subject to the bright-line test. This is because there is an arrangement to build a dwelling on the land, and because it is ______________ that can have a dwelling erected on it under the relevant district plan
TIB Vol 28 No 1
bare land
70
Example: Development Andrew buys an empty plot of land that is zoned for residential purposes. He plans to develop the plot by subdividing it into four lots and building houses on each of the lots. Andrew sells lot 1 “off the plan” to Bob. One month later, Bob sells lot 1 to Carla. Lot 1 would be “residential land” and Bob’s sale would be subject to the bright-line test. This is because there is an arrangement to build a dwelling on the land, and because it is bare land ________________ under the relevant district plan
TIB Vol 28 No 1
that can have a dwelling erected on it
71
Example: Development Andrew buys an empty plot of land that is zoned for residential purposes. He plans to develop the plot by subdividing it into four lots and building houses on each of the lots. Andrew sells lot 1 “off the plan” to Bob. One month later, Bob sells lot 1 to Carla. Lot 1 would be “residential land” and Bob’s sale would be subject to the bright-line test. This is because there is an arrangement to build a dwelling on the land, and because it is __________________ under the relevant district plan
TIB Vol 28 No 1
bare land that can have a dwelling erected on it
72
Example: Development Andrew buys an empty plot of land that is zoned for residential purposes. He plans to develop the plot by subdividing it into four lots and building houses on each of the lots. Andrew sells lot 1 “off the plan” to Bob. One month later, Bob sells lot 1 to Carla. Lot 1 would be “residential land” and Bob’s sale would be subject to the bright-line test. This is because there is an arrangement to build a dwelling on the land, and because it is bare land that can have a dwelling erected on it under the ______________
TIB Vol 28 No 1
relevant district plan
73
Determining whether there is a farming or agricultural business on the land for the purposes of the Brightline Test, requires looking at the same factors that determine whether there is “a _____________” under general tax law. This requires looking at the nature of the activities carried on and the intention of the taxpayer in undertaking the activities. Even if there is there is no farming business being run on the land, it can still be considered “farmland” if the land is capable of being worked as a farming or agricultural business.
Determining whether land is capable of being worked requires looking at the capability of the land at the time of the disposal. Land that requires significant investment or modification to be used as a farming business would therefore not qualify.
TIB Vol 28 No 1
business
74
Determining whether there is a farming or agricultural business on the land for the purposes of the Brightline Test, requires looking at the same factors that determine whether there is “a business” under general tax law. This requires looking at the nature of the activities carried on and the intention of the taxpayer in undertaking the activities. Even if there is there is no farming business being run on the land, it can still be considered “______________” if the land is capable of being worked as a farming or agricultural business.
Determining whether land is capable of being worked requires looking at the capability of the land at the time of the disposal. Land that requires significant investment or modification to be used as a farming business would therefore not qualify.
TIB Vol 28 No 1
Farmland
75
Determining whether there is a farming or agricultural business on the land for the purposes of the Brightline Test, requires looking at the same factors that determine whether there is “a business” under general tax law. This requires looking at the nature of the activities carried on and the intention of the taxpayer in undertaking the activities. Even if there is there is no farming business being run on the land, it can still be considered “farmland” if the land is ______________________________________.
Determining whether land is capable of being worked requires looking at the capability of the land at the time of the disposal. Land that requires significant investment or modification to be used as a farming business would therefore not qualify.
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capable of being worked as a farming or agricultural business.
76
Determining whether there is a farming or agricultural business on the land for the purposes of the Brightline Test, requires looking at the same factors that determine whether there is “a business” under general tax law. This requires looking at the nature of the activities carried on and the intention of the taxpayer in undertaking the activities. Even if there is there is no farming business being run on the land, it can still be considered “farmland” if the land is capable of being worked as a farming or agricultural business.
Determining whether land is capable of being worked requires looking at the ____________________________. Land that requires significant investment or modification to be used as a farming business would therefore not qualify.
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capability of the land at the time of the disposal
77
Determining whether there is a farming or agricultural business on the land for the purposes of the Brightline Test, requires looking at the same factors that determine whether there is “a business” under general tax law. This requires looking at the nature of the activities carried on and the intention of the taxpayer in undertaking the activities. Even if there is there is no farming business being run on the land, it can still be considered “farmland” if the land is capable of being worked as a farming or agricultural business.
Determining whether land is capable of being worked requires looking at the capability of the land at the time of the disposal. Land that requires ________________ or modification to be used as a farming business would therefore not qualify.
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significant investment
78
Determining whether there is a farming or agricultural business on the land for the purposes of the Brightline Test, requires looking at the same factors that determine whether there is “a business” under general tax law. This requires looking at the nature of the activities carried on and the intention of the taxpayer in undertaking the activities. Even if there is there is no farming business being run on the land, it can still be considered “farmland” if the land is capable of being worked as a farming or agricultural business.
Determining whether land is capable of being worked requires looking at the capability of the land at the time of the disposal. Land that requires significant investment or ____________ to be used as a farming business would therefore not qualify.
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Modification
79
Determining whether there is a farming or agricultural business on the land for the purposes of the Brightline Test, requires looking at the same factors that determine whether there is “a business” under general tax law. This requires looking at the nature of the activities carried on and the intention of the taxpayer in undertaking the activities. Even if there is there is no farming business being run on the land, it can still be considered “farmland” if the land is capable of being worked as a farming or agricultural business.
Determining whether land is capable of being worked requires looking at the capability of the land at the time of the disposal. Land that requires significant investment or modification to be used as a farming business _______ therefore _____________.
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would therefore not qualify
80
Marama purchases a lifestyle block with a house and a small area of farmland. A small number of sheep are kept on the land to keep the grass down. The land is not “farmland” as the land is ______________________________ nor is it capable of being worked as a farming business. It is a hobby farm rather than a genuine farming business. If the area of farmland was larger and capable of being used for farming purposes, it would likely be “farmland”.
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not being worked as a farming business
81
Marama purchases a lifestyle block with a house and a small area of farmland. A small number of sheep are kept on the land to keep the grass down. The land is not “farmland” as the land is not being worked as a farming business ___________________________________. It is a hobby farm rather than a genuine farming business. If the area of farmland was larger and capable of being used for farming purposes, it would likely be “farmland”.
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nor is it capable of being worked as a farming business
82
Tina owns a 50 hectare plot of land. The land is covered in gorse. The land is not “farmland” as it is _____________________________.
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not currently capable of being used for farming purposes
83
Uri has a five hectare plot of land that is suitable for use as a rose farm. This land is “farmland” as it is ______________________________.
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currently capable of being used for farming purposes
84
In some circumstances for the bright-line test, a person will be required to determine the area of land used for their private residential purposes and the area of land used for other purposes. For example, when a single property has been used by the owner partly as a residential home and partly ________________, the relative areas will need to be determined. In many cases, a taxpayer will have determined the relative areas in working out the tax deductions (insurance and rates, for example) that can be claimed. The determination of the areas includes any land used for the relevant purposes (for example, a backyard or garage for the home).
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as a rental property
85
The main home exclusion can only apply when the property is actually used as the main home. The exclusion can only apply in full or not at all; it does not apply on a _______________. As a result, if a property is used less than 50 percent of the time as the main home of the person, the main home exclusion will not apply.
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proportionate basis
86
The main home exclusion can only apply when the property is actually used as the main home. The exclusion can only apply in full or not at all; it does not apply on a proportionate basis. As a result, if a property is used less than 50 percent of the time as the main home of the person, the main home exclusion ____________.
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will not apply
87
The land must have been used for most of the time that the person owns the land as their main home. This requires the property to have been used more than 50 percent of the time as their main home for the period the person owns the land. The land does not need to have been used _________________ as their main home. For example, a main home can be rented out for short periods while the owner is on holiday or before settlement of the sale of the property, as long as the time is less than the private residential use.
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without interruption
88
The land must have been used for most of the time that the person owns the land as their main home. This requires the property to have been used more than 50 percent of the time as their main home for the period the person owns the land. The land does not need to have been used without interruption as their main home. For example, a main home can be rented out for short periods while the owner is on holiday or before _____________________, as long as the time is less than the private residential use.
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settlement of the sale of the property
89
The land must have been used for most of the time that the person owns the land as their main home. This requires the property to have been used more than 50 percent of the time as their main home for the period the person owns the land. The land does not need to have been used without interruption as their main home. For example, a main home can be rented out for short periods while the owner is on holiday or before settlement of the sale of the property, as long as _____________________________.
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the time is less than the private residential use
90
The ____________________ determines, on an objective basis, which property is the person’s main home. The test does not allow a person to elect their main home. Various factors may be relevant in determining which property the person has the greatest connection with, including:-
• the time the person occupies the dwelling;
• where their immediate family (if any) live;
• where their social ties are strongest;
• the person’s use of the dwelling;
• the person’s employment, business interests and economic ties to the area where the dwelling is located; and
• whether the person’s personal property is in the dwelling.
These factors are similar to those used to determine if a person has a “permanent place of abode” under current tax law. Therefore, existing guidance on the “permanent place of abode” test could assist in determining which property the person has the greatest connection with.
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greatest connection test
91
The greatest connection test determines, on an objective basis, which property is the person’s main home. The test does not allow a person to elect their main home. Various factors may be relevant in determining which property the person has the greatest connection with, including:-
• the time the person occupies the dwelling;
• where their immediate family (if any) live;
• where their social ties are strongest;
• the person’s use of the dwelling;
• the person’s employment, business interests and economic ties to the area where the dwelling is located; and
• whether the person’s personal property is in the dwelling.
These factors are similar to those used to determine if a person has a “____________________” under current tax law. Therefore, existing guidance on the “permanent place of abode” test could assist in determining which property the person has the greatest connection with.
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permanent place of abode
92
Using the “main home” exclusion for two properties _____________________, a person may use the main home exclusion for two properties sold at the same time. An example is when a person lives in a home for less than one year as their main home, and moves into a new home while trying to sell the original home. The original home may satisfy the requirements to be the person’s main home (as discussed above) for the period before moving into the main home. The new home may also satisfy the requirements to be the person’s main home for the subsequent period. The ownership overlap of the properties will not mean the original home fails to satisfy the requirements to be a main home for the previous period. If the two properties were sold at the same time, the owner would be able to use the main home exclusion for both properties (if they both satisfied the requirements to be a main home for the different periods).
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Under limited circumstances
93
Using the “main home” exclusion for two properties Under limited circumstances, _________________ for two properties sold at the same time. An example is when a person lives in a home for less than one year as their main home, and moves into a new home while trying to sell the original home. The original home may satisfy the requirements to be the person’s main home (as discussed above) for the period before moving into the main home. The new home may also satisfy the requirements to be the person’s main home for the subsequent period. The ownership overlap of the properties will not mean the original home fails to satisfy the requirements to be a main home for the previous period. If the two properties were sold at the same time, the owner would be able to use the main home exclusion for both properties (if they both satisfied the requirements to be a main home for the different periods).
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a person may use the main home exclusion
94
Using the “main home” exclusion for two properties Under limited circumstances, a person may use the main home exclusion _________________________. An example is when a person lives in a home for less than one year as their main home, and moves into a new home while trying to sell the original home. The original home may satisfy the requirements to be the person’s main home (as discussed above) for the period before moving into the main home. The new home may also satisfy the requirements to be the person’s main home for the subsequent period. The ownership overlap of the properties will not mean the original home fails to satisfy the requirements to be a main home for the previous period. If the two properties were sold at the same time, the owner would be able to use the main home exclusion for both properties (if they both satisfied the requirements to be a main home for the different periods).
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for two properties sold at the same time
