Income Tax on Capital Gains from the Sale of Land - Inflation Relevance

The objector in Anzamco Ltd v Commissioner of Inland Revenue (1983) 6 NZTC 61,522 was a company that had bought and developed a farm and sold it at a significantly higher price. The Commissioner taxed the profits under paragraphs 67(4)(a) and (e) of the Income Tax Act 1976. The court allowed the taxpayer's objection under paragraph (a), which taxes profits when land is purchased with the intention of sale. It upheld the Commissioner under paragraph (e), which taxes profits from the sale of land where an “undertaking or scheme … involve[ed] the development … of that land” and the scheme was commenced within ten years of acquisition. The rules remain the same under the Income Tax Act 2007. In effect, therefore, wherever a taxpayer a farm or other land and starts a development scheme within ten years, and later sells the land the total profits are taxable, no matter how long he has held the land. In practice, this provision is rarely enforced