IR7 Question 20 Income from taxable sale/disposals of property
Include all income from land sales that are excluded from the residential property deduction rules. Tax losses from disposals of residential property are also included under this question. Net income from a bright-line sale is included under Residential income at Question 18. except the main home and holiday home taxed under the mixed-use asset rule.
The profits are taxable if the partnership or LTC:
- buys a property for the purpose or intention of resale
- buys and sells land and/or buildings as a business
The profits may be taxable if the partnership or LTC:
- trades as a builder and improves a property before selling it
- develops or subdivides land and sells sections
- has a change of zoning on its property, and sells it within 10 years of buying it.
If the partnership or LTC is a New Zealand tax resident it will need to pay tax on its worldwide income under New Zealand tax law. This includes any property sales worldwide whether caught under the bright-line test for residential property sales or the other property rules.
If the partnership or LTC purchased a residential property on or after 1 October 2015 and sold/disposed of it within the bright-line period, any profit will be taxable, whether the intention at the time of purchase was for resale or not. This is called the bright-line test.
The bright-line period for:
- properties purchased/acquired on or after 1 October 2015 through to 28 March 2018 inclusive, is two years,
- properties purchased/acquired on or after 29 March 2018 is five years.
Write the income or loss (other than a bright-line income or loss) at Box 20B.
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 the return. The form explains how to calculate and correctly return the resulting profit or loss. The form can be downloaded from ird.govt.nz. Complete the form even if the details have been included in a Financial statements summary - IR10 or set of accounts.
Question 20A Residential land withholding tax (RLWT) credit
If a partner had RLWT deducted from the sale or transfer of a residential property located in New Zealand, they’ll need to show the full amount of the RLWT in their own individual income tax return. Don’t include it in the partnership tax credits.
If the LTC is an “offshore RLWT person” and has sold or transferred residential property located in New Zealand, RLWT may have been deducted from the sale price.
The LTC should have received a statement on the completion of the sale process showing the amount of RLWT deducted. The LTC can claim a credit for any RLWT deducted. Show the amount of RLWT deducted, less any RLWT paid back to the LTC 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 the LTC and/or transferred to outstanding amounts during the income year.