There’s a potential tax trap for unwary investors in Auckland’s proposed Unitary Plan. It’s called section CB 14 of the Income Tax Act.
A capital gain from the sale of land is taxed if 20% or more of the gain is the result of the likelihood of a change to the rules of a District Plan or the removal of a condition affecting the land under the Resource Management Act, or a similar occurrence.
We’ve already seen coverage in the media about how values of some properties are going to increase as a result of the proposed zoning changes in the Unitary Plan. Those value increases may have already occurred now the Plan has been publicly notified.
There are exceptions to CB 14 (e.g. it won’t apply if you’ve owned the land more than 10 years) but any investor selling property in Auckland now needs to be especially aware of CB 14.