Land development tax amendment

Press, 11 July 1983, Page 4

Land development tax amendment

PA Wellington Income tax law will be amended as the result of a court decision which may have led to people being taxed for selling a house built on land bought less than 10 years earlier. The Minister in charge of the Inland Revenue Department, Mr Falloon, said that the proposed amendment would clear up confusion which had arisen after a High Court decision which involved the sale of farmland. Under section 67 of the Income Tax Act, 1976, profits from sales of land are taxable if development on the land is begun within 10 years of the property

being bought. The development in question, the section says, must not be of a minor nature for the section to apply. Mr Falloon said the proposed bill would change the present law to make sure section 67 would apply only to developments in the nature of subdivisions. The court case between Anzamco (in liquidation) and the Commissioner of Inland Revenue, centred on what constituted development of a minor nature. The court interpreted the reference as applying to a situation where a farm was sold after a programme of normal farm development. Mr Falloon said the deci-

sion could be far-reaching because it might extend section 67 to land “developed for residential or commercial occupation.’’ A departmental spokesman said that if a person had a vacant section and built their own home then the section would be developed.

“The inference was that that would mean section 67 would apply if the house was sold, as long as it had been built within 10 years of the land being bought,” he said. Mr Falloon said the Government “was anxious to rectify the position in regard to both the rural and urban situation.”