Tax on subdivision?

Our Experts Answer:

Section CB12 taxes gains derived from the subdivision or development of land within ten years of acquisition where the work involved was more than minor. There are exemptions from the taxing provisions where the subdivision was done to enable the taxpayer to live on the land or to derive rental income from the land. There is also an exemption where the land being subdivided is the residence of the taxpayer provided the land is less than 4500sqm in size. This exemption does not cover land held by trusts though. Interestingly, a recent commentary from IRD dealing with this section also suggests that it is only the land included in the "scheme of division" that is referred to in CB12. The implication of this is that if one section is sold and one is retained the sold section is not taxed under this section because the land involved in the scheme of division has not itself been divided. This commentary, whilst representing the view of the revenue is not yet able to be relied on by taxpayers. The subdivision of land and the associated tax consequences are complex and it is recommended you seek a tax opinion covering your specifics before forming a view on the likely tax outcomes.