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Taxation of Land Transactions

NZ $45.00
Author(s): Peter McLeod, Catherine Bibbey
Published: 6 July, 1998
Pages: 127



This booklet provides an overview of a number of relevant goods and services tax, income tax and duty issues. It includes a case study situation of a land transaction involving tax issues. The presenters have posed a series of relevant questions and provided answers to those questions.

The last seminar presented by the Law Society on the taxation of land transactions was in 1992. At that stage GST had been with us for less than six years and there was little judicial guidance on the interpretation and application of the GST provisions to real property transactions. Since 1992, as well as significant judicial development of the law relating to GST and the accrual rules, a number of important new “regimes” have been enacted. They are the Compliance and Penalties, Binding Rulings and Challenges regimes. Each of these make the early identification of tax issues that arise in relation to property transactions critical.

A significant part of legal practice is advising on and attending to the conveyances of real property. Often the solicitor is the only professional consulted (initially at least) by a client considering property transfers and/or developments. It is vitally important that the lawyer is:
  • familiar with the relevant statutory provisions applying to transfers of land, and
  • aware of the consequences of the failure to apply the tax law correctly.

Recent judicial developments have shown that it is unacceptable for lawyers to advise clients on property transactions “in a vacuum”. Tax and transfers of land go “hand in hand”. A lawyer who pleads total ignorance of tax law on the basis that it has “got too hard” may find this ignorance costly.

With the combination of this and the presentation of the seminar on a practical level, the seminar presenters hope that lawyers will familiarise themselves with basic concepts, be able to identify possible pitfalls, and be in a position to provide the tax advice that a client is entitled to when consulting a lawyer in relation to property transactions (or at least refer the client to a specialist or obtain that specialist advice themselves).

The booklet has been prepared on the basis of the law as it presently stands, namely June 1998.

Catherine Bibbey
Peter McLeod


Content outline

  • Obligations and implications
    • Implications for taxpayers of failing to comply
    • Lawyers' obligations to clients regarding tax advice
  • Relevant GST issues
    • Liability to register for GST
    • Time of supply
    • GST and developers
    • Where residential property purchased for development or resale is subsequently rented out
    • Going concerns
    • Second-hand goods
    • Working of the contract
    • GST invoices and settlement statement
    • Mortgagees and GST issues
  • Income tax consequences
    • Scheme or undertaking
    • Amounts derived from the sale of disposition of any land
    • Rents, fines and premiums and other revenues derived by the owner of land from any lease, licence of easement affecting the land
    • Amounts derived from the use or occupation of any land
    • Sale of land with standing timber
    • Leases for less than market rental
    • Accural rules
    • Stamp duty: exemption for residential land
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