Income tax – Application of the s CZ 39 5 year bright-line test to certain family and close relationship transactions
This interpretation statement considers the requirements of the 5 year bright-line test for residential land in s CZ 39 of the Income Tax Act 2007 and how it applies to certain family and close relationship transactions. Those family and close relationship transactions are when the ownership of residential land (that is not a main home) changes from:
- parents to their child to assist the child with buying their first home;
- one partner to themselves and their new partner; and
- all the beneficiaries who inherit the land under a will or rules of intestacy to some of the beneficiaries.
The bright-line test under s CZ 39 applies if a person first acquired an estate or interest in residential land on or after 29 March 2018 but before 27 March 2021.
Replaced
Statements made at [144] and [145] and the third paragraph in Example | Tauira 5 could be said to be inconsistent with QB 26/04: Income tax - Bare trusts and mortgages. The comments were intended to refer to situations where there was no bare trust or agency because the property was held for the benefit of its legal owners who had independent power, discretion and responsibility in respect of the property, and were not acting on any instructions. However, to the extent those comments could be read as being inconsistent with QB 26/04, they are replaced.
The Commissioner no longer considers the statements made at [67] on undisclosed principals represents the law. An agent for an undisclosed principal will be a person that acts on another person’s behalf for the purposes of s YB 21. For further discussion on undisclosed principals, see IS 21/01: GST and agency.
The affected paragraphs have been highlighted in grey in the document.
Income Tax Act 2007, ss AA 3, BD 3, subpart CB (ss CB 6A, CB 6AB, CB 6AC, CB 6AE, CB 6 to CB 12, CB 14, CB 16A, CB 23B), subpart CZ (ss CZ 39, CZ 40), part D (s DB 23), s EA 2, subpart EL (ss EL 5, EL 7, EL 20), subpart FB (ss FB 1B, FB 3A), subpart FC (ss FC 1, FC 2, FC 9), subpart GC (s GC 1), subpart HB, subpart HC (s HC 14), s YA 1 (“amount”, “bright-line acquisition date”, “bright-line disposal date and bright-line date”, “bright-line period”, “company”, “dispose”, “dwelling”, “estate or interest in land”, “interest”, “land”, “residential land”, “trading stock”), YB 21
Interpretation Act 1999, s 29
Land and Income Tax Act 1954, ss 101, 102
Land Transfer Act 2017, s 51
Property Law Act 2007, ss 9, 25
Property (Relationships) Act 1976, part 6, s 25
Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022, ss 48, 49
Taxation (Bright-Line Test for Residential Land) Act 2015, s 4
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