The tax bill just introduced to Parliament is billed by the Government as pro-economic recovery and it is in lots of ways it is. But snuck into the bill are, however, some moves that have nothing to do with economic recovery.
One of those moves is to tighten up on the rules around regular buying and selling of land. That issue arises in the context of exceptions to exemptions. For example, the principal exception to the application of the Bright Line test is the main home exclusion found in s CB 16A. It contains an exemption from the exclusion where the person has engaged ina regular pattern of acquiring and disposing of residential land.
There is a similar exclusion from the operation of ss CB 6 to 11, contained in s CB 16. It too has an exclusion from the exemption where the person has been engaged in a regular pattern of acquiring and disposing of dwelling houses. There is similarly worded exceptions applying to the building and selling premises in s CB 19.
Inland Revenue’s concern is that these exceptions are too easy to get around but using different people and entities as the persons acquiring the land. That stymies the operation of the provisions.
To thwart those moves, Inland Revenue is planning to expand the exceptions to include a group of people acting in concert. What will count as being a group of persons are situations where they all occupy all of the properties together as their residence. Additionally, there will be a group of persons where the property is owned by trustees or another entity and at least one of the people who occupy all the properties has significant involvement in or control of the trust or other entity.
The examples Inland Revenue uses of significant involvement as coextensive with control. In practice, with dwellings at least it is likely to all boil down to whether the people in the group lived in the properties.