IR3 Question 25 Income from taxable sale/disposals of property
Income from the sale of land and/or buildings
Include all income from land sales that are that are excluded from the residential property deduction rules. Also include taxable sales of the main home or holiday homes taxed under the mixed-use asset rules.
Tax losses from disposals of residential property are also included under this question.
Net income from a bright-line sale other than your main home or a property taxed under the mixed-use assets rules is included under Residential income at Question 22.
Profits are taxable if you bought a property for the purpose of reselling it, or are in the business of buying and selling land and/or buildings.
The profits may also be taxable if you:
- are a builder and improved a property before selling it,
- developed or subdivided land and sold sections, or
- had a change of zoning on your property and sold it within ten years of buying it.
If you purchased a residential property on or after 1 October 2015 and sold/disposed of it within a certain period, any profit will be taxable, even if you didn’t intend to sell when you purchased it.
This is called the bright-line test. The bright-line test applies to:
- properties purchased/acquired on or after 1 October 2015 through to 28 March 2018 inclusive and sold/disposed of within 2 years, and
- properties purchased/acquired on or after 29 March 2018 and sold within 5 years.
The bright-line test needs to be considered when none of the other land sale rules apply to the disposal of the property.
Income and losses for property captured by the bright line test are treated differently in the tax return:
- After a bright line sale, when net income (a profit) is made, the profit is included in the residential rental income Box (22A). However, this does not apply to disposals of your main home or a property taxed under the mixed-use assets rules. Unless the property is included in a portfolio expenses from other properties cannot be offset against the net income from the disposal,
- After a bright line sale, when a net loss is made, any excess deductions must be carried forward to a later income year when they can be used to offset net income from the land sale provisions, or future disposals captured by the bright line rules.
Show the total profit from other property in Box 25.
For more information on property sales see our guide Buying and selling residential property - IR313.
Complete a Property sale information - IR833 form for each property sold/disposed of and include it with your return. The form explains how to calculate and correctly return the resulting profit or loss.
You can download the form at ird.govtnz/forms-guides Complete the form even if the details have been included in a Financial statements summary - IR10 or set of accounts.
If the property was taxable under the bright-line test and made a loss, any excess deductions cannot be claimed unless they can be offset against net income from other residential property sales.
For more information on property sales, refer to our guide Buying and selling residential property - IR313.
Question 25A Residential land withholding tax (RLWT) credit
If you are an "offshore RLWT person" and have sold or transferred residential property located in New Zealand, RLWT may have been deducted from the sale price. You should have receive d a statement on the completion of the sale process showing the amount of RLWT deducted. You can claim a credit for any RLWT deducted. Show the amount of RLWT deducted, less any RLWT paid back to you and/or transferred to outstanding amounts during the income year.
If there was more than one amount of RLWT deducted, show the combined amount, less any RLWT paid back to you and/or transferred to outstanding amounts during the income year.
Attach a note showing the name of your withholder(s) to the return.