requires looking at the nature of the activities carried on and the intention of the taxpayer in undertaking these activities. Even if is no farming business being run on the land, it can still be considered farmland if the land is capable of being worked as a farming or agricultural business. Determining whether land is capable of being worked requires looking at the capability of the land at the time of the disposal. Land that requires significant investment or modification to be used as a farming business would therefore not qualify. Example: Land that because of its area is not capable of being used as farmland Marama purchases a lifestyle block with a house and a small area of farmland. A small number of sheep are kept on the land to keep the grass down. The land is not farmland as the land is not worked as a farming business nor is it capable of being worked as a farming business. It is a hobby farm rather than a genuine farming business. If the area of farmland was larger and capable of being used for farming purposes, it would likely be farmland. Example: Land that because of its nature is not capable of being used as farmland Tina owns a 50 hectare plot of land. The land is covered in gorse. The land is not farmland as it is not currently capable of being used for farming purposes. Example: Small plot of land that is farmland Uri has a five hectare plot of land that is suitable for use as a rose farm. This land is farmland as it is currently capable of being used for farming purposes. Main home (Sections CB 16A, YA 1) The bright-line test does not apply to the disposal of a person’s main home. Requirements for the main home exception To qualify for the home” exception, the land must have been used predominantly, for “main most of the time the person owns the land, for a dwelling that was the main home of the person or a beneficiary of a that owns the property (subject to some limitations). Used predominantly as person’s main home To be used predominantly as a main home, means that most of the area of the land must have been actually used for the home. The test is based on a person’s actual use of the property and not the person’s intended use of the property.
requires looking at the nature of the activities carried on and the intention of the taxpayer in undertaking these activities. Even if is no farming business being run on the land, it can still be considered farmland if the land is capable of being worked as a farming or agricultural business. Determining whether land is capable of being worked requires looking at the capability of the land at the time of the disposal. Land that requires significant investment or modification to be used as a farming business would therefore not qualify. Example: Land that because of its area is not capable of being used as farmland Marama purchases a lifestyle block with a house and a small area of farmland. A small number of sheep are kept on the land to keep the grass down. The land is not farmland as the land is not worked as a farming business nor is it capable of being worked as a farming business. It is a hobby farm rather than a genuine farming business. If the area of farmland was larger and capable of being used for farming purposes, it would likely be farmland. Example: Land that because of its nature is not capable of being used as farmland Tina owns a 50 hectare plot of land. The land is covered in gorse. The land is not farmland as it is not currently capable of being used for farming purposes. Example: Small plot of land that is farmland Uri has a five hectare plot of land that is suitable for use as a rose farm. This land is farmland as it is currently capable of being used for farming purposes. Main home (Sections CB 16A, YA 1) The bright-line test does not apply to the disposal of a person’s main home. Requirements for the main home exception To qualify for the “main home” exception, the land must have been used predominantly, for most of the time the person owns the land, for a dwelling that was the main home of the person or a beneficiary of a that owns the property (subject to some limitations). Used predominantly as person’s main home To be used predominantly as a main home, means that most of the area of the land must have been actually used for the home. The test is based on a person’s actual use of the property and not the person’s intended use of the property.
2015-sr-bright-line-test.docx