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Residential property Ngā whare rīhi me ngā whare haumi

Property glossary of terms

Glossary of common terms used in regards to property

List of words and terms used in the property section
Aggregation rule Associated person
Association rules Company test
GST Look-through company (LTC)
Main home exclusion Mixed-use asset
Off the plan Property
Provisional tax Purchase
Residential exclusion Residential land
Sale Shareholder
Taxable supplies Trader
Trading stock Tripartite test
Two relatives test Voluntary disclosure
Zero rating

Aggregation rule

The combination of many different rules of association to form an overall association.

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Associated person

Persons and companies, trusts or partnerships which are associated with each other under tax law.

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Association rules

The rules used to determine if several people or entities are associated for tax purposes by their common interests in entities.

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Company test

The test to determine if an individual is associated to a company.

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A tax on the supply of most goods and services in New Zealand.

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Look-through company (LTC)

An LTC has the obligations and benefits of an ordinary company but has elected to have its income tax "looked-through".  The shareholders of an LTC are liable for income tax on the LTC's profits, while being able to offset the LTC's losses against their other income (subject to a loss limitation rule).

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Main home exclusion (Bright-line test)

The term used to describe the tax exemption for income earned from the sale of a family/main home.

If you buy and sell your family (main) home within five years (two years if the property was acquired on or after 1 October 2015 through to 28 March 2018 inclusive), the income you earn from the sale of the property is not taxable if you used:

  • the property as your main home more than 50% of the time while you owned it
  • more than 50% of the area of the property as your main home. This includes the yard, gardens, garage, pool areas and tennis courts, etc.

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Mixed-use asset

An asset that is used for more than one purpose, for example commercial and private use.

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Off the plan

Entering into an agreement to purchase a property that is yet to be built. You can view the design, building plans and specifications but there is no physical property to see or inspect.

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The term used for land and buildings, and the rights under an option to purchase property.

For the bright-line test, this includes a lease with a perpetual right of renewal.

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Provisional tax

An advance payment of tax, similar to PAYE, which will be set off against the final tax liability at the end of the tax year.

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Any form of acquisition of property including transfers or gifts.

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Residential exclusion (Intention test)

Term used in tax law to describe private residences being excluded from the tax rules around disposal of land for residential property.

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Residential land (Bright-line test)

The term used in the bright-line test to describe land:

  • with a dwelling on it, or
  • a dwelling can be built on it under the local council's planning rules.

Residential land does not include land that is mainly used for business or farmland.

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Any form of disposal of the property including transfers or gifts.

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An individual or entity that owns or holds part ownership of a company in the form of shares.

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Taxable supplies

Goods or services supplied in New Zealand in the course of business where GST is required to be applied.

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A term also used to describe property dealers.

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Trading stock

Goods which are purchased for resale as part of a business, for property dealers or traders this will be the properties acquired.

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Tripartite test

Generally means that if person A is associated with B, and B with C, then person A is associated with person C.

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Two relatives test

This test determines if two people are associated by relationship for tax purposes. This includes individuals who are married in a civil union or de facto relationship. It also includes those within two degrees of blood relationship, such as a sibling, parent or offspring.

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Voluntary disclosure

When you tell us if there’s something wrong with your tax return/s before we find out through routine checking or an audit.

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Zero rating

Where GST applies to a transaction but it is applied at the rate of zero percent.