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Property Development Guide — Tax Rules, GST, and Structuring in NZ

the property development tax in New Zealand. The guide covers the development profit as the ordinary income, the GST registration and the zero-rating, the subdivision rules, the holding period strategies, and the structuring through the companies and the trusts.

Development Income and GST

In New Zealand, the property development profit is treated as the ordinary income, not the capital gain, and is taxed at the developer's marginal tax rate. The intention at the acquisition determines the tax treatment — the profit from the development is assessable if the property was acquired for the disposal. The GST registration is mandatory if the annual turnover from the development activity exceeds the $60,000 threshold. The GST on the sale of the new residential properties is charged at the 15% rate, while the sale of the existing residential properties may be GST-exempt (the exempt supply for the residential rental properties). The GST zero-rating applies to the sale of the going concerns and the land between the GST-registered persons. Refer to our GST Guide → for the detailed GST rules.

Structuring and Holding Periods

The optimal structure depends on the development scale and the exit strategy. The company structure offers the flat 28% tax rate and the limited liability but the imputation credit requirements. The trust structure provides the 33% trustee rate and the asset protection. The look-through company (LTC) passes the income and the losses through to the shareholders. The holding period is critical — the properties held for the long-term rental may be treated as the capital account, while the short-term development-for-sale is the revenue account. See our Property Tax & Bright-Line Guide → for the holding rules.