Inland Revenue seeks feedback on land sale taxation

There are concerns that current restrictions are not working as intended

Inland Revenue seeks feedback on land sale taxation

Inland Revenue is seeking feedback for a proposed rule change in the taxation of sales of land.

In the tax policy consultation document Habitual buying and selling of land, the agency said that there are concerns that current restrictions on people being exempt from paying tax on regular buying and selling of land are not working as intended. There are current exclusions from tax for people who use land as their main home, residence, or business premises.

“As currently drafted, taxpayers who habitually buy and sell can structure around the regular pattern restrictions. This can be done by using associated persons to carry out separate transactions, or by varying each transaction so that there is no ‘pattern,’” Inland Revenue said.

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The practice undermines the integrity of the tax system as it allows people to take advantage of the exclusions that should not otherwise be awarded.

Proposed rule changes include extending the restrictions to apply not only to a single person but to a group of people or entities that show a regular pattern of buying or selling land. It is also proposed that regular pattern restrictions should apply more broadly to any pattern of buying and selling land used as a residence or business premises.

Submissions close on 18 October. Ministers will make decisions on this issue late this year after submissions are considered. Any changes to taxation rules will be included in a bill early next year, Inland Revenue said.

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