Subdivision Tax Issues

Subdividing? What about tax?

Are you considering subdivisions or development of your land, and are wanting to understand the taxation implications of doing so, both from an income tax perspective and GST perspective?

If the answer is yes, then we can assist you in understanding the intricacies of the land taxing provisions. We have been preparing and providing advice for many years, and we cannot stress enough the importance of being pro-active and seeking professional guidance upfront, prior to you taking your first steps down the path of developing and/or subdividing your land into separate titles.

Certainly, the recent changes to the bright-line rues and the deductibility of interest costs which relate to residential land, have added an additional layer of complexity to being able to understand the true costs associated with your proposed undertaking.

In this regard you can read more about the ‘Disposal of Land – to be taxed or not to be taxed?’ in Richard’s series here:

  1. Income tax imposition upon the disposal of land.
  2. Minor subdivision rule
  3. Disposal within five years: bright-line test for residential land 
  4. Disposal: amount from land affected by change and not already in income 
  5. Disposal: amount from major development or division and not already in income 
  6. Disposal: those who may be carrying on a business of land dealing, land development and/or subdivision, or of erecting buildings

While we prefer to provide your guidance in advance of any work commencing on the subdivision scheme, so that you are fully aware of all the potential implications upfront, unfortunately it does not always work out that way. Often we are asked to assist with Inland Revenue enquires, where the land is disposed of at the completion of the project, no land sales income is disclosed in the tax return, and Inland Revenue are now asking some “please explain” type questions. 

If you would like to talk with us about these issues, please fill in the form below, or get in touch here.

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Richard Ashby (our tax specialist) provides advice, comments and updates on what’s been happening in the world of tax each week.