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Articles by Matthew Gilligan

Matthew Gilligan

Are you a property dealer?


One of the questions I get asked most frequently is, 'Am I a property dealer?' The typical scenario is that a client approaches me after having sold a couple of properties in the past few years and is now about to sell another one. They want to know if these property sales mean that they are 'property dealers'. 

They are concerned that if they are dealers, not only will they be taxable on the impending sale, but the Inland Revenue Department will revisit the past sales (which for the purposes of our scenario have been treated as non-taxable) and tax those. They have also heard of 'tainting' and are concerned that if they are property dealers every property they buy and sell from now until the end of time will be taxable.

To step back for a moment, at a technical level the question is, 'Am I engaged in a business of dealing in property?' Unfortunately, as much as I would like to be able to give you a formula in terms of the number of transactions over a specified time period that could be applied to work out whether you are in the business or not, it is not possible to do so. Like so many things in tax, whether or not you are conducting a business of dealing in property depends on the specifics of your case. A leading tax case on the topic suggests that to be in the business of dealing there needs to be “a reasonable frequency of transactions or some continuity of effort in respect of the buying and selling of land”. Further, the same case noted that “even where there are a number of transactions concerning land, there may well be some other explanation. The sales and purchases may be entirely for personal reasons. They may constitute a form of investment or change of investment with the object of getting a return from the property in preference to other forms of investment of money.”

What this means is that each situation needs to be judged on its own merits. It is conceivable that somebody could buy and sell three properties and be regarded as carrying on a business of dealing in land. On the other hand, somebody may buy and sell more than three properties in a relatively short space of time but not be carrying on a business, perhaps because there were personal reasons outside of their control that necessitated the sale of the properties.

In the current environment where we now have a five-year bright-line rule in place, the question of whether one is a land dealer is going to pop up less frequently. Residential properties bought and sold within a five-year period are going to be taxable whether or not you are in business. However, determining whether or not you are in business is important in the context of tainting. If you are deemed to be carrying on a business of dealing in land, then a property that is acquired for hold purposes outside of that business is tainted. The consequence of this is that any sale within 10 years of acquisition is taxable (i.e. tainting doubles the five-year bright-line rule). Therefore, while the existence of the five-year bright-line rule means that the purchase and sale of residential properties will be more likely to be taxable whether you are in the business or not, being in the business of dealing in land still has relevance because it brings into play the tainting provisions, which double the five-year bright-line rule.

In closing, if you have conducted a number of purchases and sales in the past and not treated the gains as taxable, then you should be wary about the possibility of being deemed in the business of dealing in land. The IRD scrutinise LINZ records for repetitive sales transactions. If you have been approached by the IRD regarding tax treatment of your past transactions you should seek professional advice. You can contact us at GRA on [email protected], +64 9 522 7955 or via our online form

Matthew Gilligan
Matthew Gilligan
© Gilligan Rowe & Associates LP

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Disclaimer: This article is intended to provide only a summary of the issues associated with the topics covered. It does not purport to be comprehensive nor to provide specific advice. No person should act in reliance on any statement contained within this article without first obtaining specific professional advice. If you require any further information or advice on any matter covered within this article, please contact the author.

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Hi Anna, It was very nice meeting you in person today. Thank you so much for coming up with this precise summary so promptly. I feel very blessed to have you, a diligent and efficient professional lady taking care of my accounting/tax needs. 

- Jackie Zhang, July 2023
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Gilligan Rowe and Associates is a chartered accounting firm specialising in property, asset planning, legal structures, taxation and compliance.

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