Taxation (Annual Rates for 2021-22, GST and Remedial Matters) Bill

Earlier in the month the FEC reported back on this bill, which was introduced in late 2021 and included some more draconian measures such as changes to brightline rules and new interest limitation rules in relation to residential land and amendments to GST, etc. No major changes were proposed, however a few noteworthy changes were made:

Amendment to the definition of “New Built Land” to include leaky buildings that were substantially re-clad (that is 75% or more) and earthquake prone buildings that were remediated and removed from the earthquake prone buildings register on or after 27 March 2020.
Amendment to “Development Exemption” in CB12/13 to ensure that the interest remains deductible after the land is disposed of for a loss. The purpose of this amendment was to encourage non-business developments and risks associated with such developments. The FEC felt that if the interest deduction ceased to apply at the time the land was sold, that this would discourage developments and therefore negatively affect the available housing stock.
Clarification that boarding establishments that operate on a commercial scale are excluded from the interest limitation rules.
The Roll over relief provisions were also amended to include transfers from a Trust to the Settlor (subject to meeting the same rules as apply for transfers from Settlor to the Family Trust) and extending the rollover relief provisions to transfers within wholly owned corporate groups.
Introduction of new “Reasonable Time” test for the purposes of applying the main home exclusion. This is to cover situations where the construction of the main home is delayed (for more than 12 months). If the test is met then all the unoccupied and construction days are counted as “Main Home” (exempt) days. This is a welcome change due to current delays arising from building supply shortages.

This bill has now become law.

March 2022