The intention test: when land you bought to resell is taxed in NZ

If you buy land with a firm intention or purpose of reselling it, the profit is taxable income whenever you sell, even 10 or 20 years later. Selling does not need to be your main reason for buying; it only needs to be one of your reasons, and more than a vague possibility. This rule, in section CB 6 of the Income Tax Act 2007, is separate from the 2-year bright-line test and is checked before it. Inland Revenue set out its current view in QB 25/08, issued 9 May 2025. Rules checked 10 November 2026.

What the intention rule says

This guide is general information about how the rule works, not tax advice for your situation. Intention cases turn on their own facts, so talk to a tax adviser before relying on it for a real sale.

Section CB 6(1) makes the amount you get from disposing of land income if you acquired it for one or more purposes that included disposing of it, or with one or more intentions that included disposing of it. Inland Revenue's short answer in QB 25/08 is that the amount from the eventual sale, "whenever that occurs", is income unless the residential or business premises exclusion applies.

Four points do most of the work:

• Any purpose counts. Disposal does not have to be your only or dominant purpose. It is enough if it was one of them.
• It must be firm. Selling must be more than "a vague idea or just a possibility" in the future (QB 25/08 para 20).
• It is tested when you acquire the land. In a typical purchase that is the date you sign a binding sale and purchase agreement, even if conditions remain (para 23).
• There is no time limit. Inland Revenue calls the idea that land held over 10 years is safe "a common misconception" (para 28).

"Land" includes any interest in land, such as a leasehold, unit title, cross lease or option (para 36). The rule applies to individuals, trusts, companies and partnerships; for a trust or company, the trustees' or directors' intentions generally count (paras 33 to 35).

How it differs from the bright-line test

People often assume that once the 2-year bright-line period has passed, a sale is tax free. That is only true if no other land sale rule applies. QB 25/08 para 18 says the bright-line test can apply only if none of sections CB 6 to CB 12 apply, so those come first. If CB 6 applies, you are taxed under it even when the sale is also within 2 years.

The two home exclusions have different requirements. QB 25/08 para 4 warns that you might fall within one and not the other, so passing our main home test does not by itself settle the intention question.

How Inland Revenue judges intention

The test is subjective: it asks what you intended. But Inland Revenue does not take your word alone. QB 25/08 para 20 says your stated purpose "will be assessed against all of the evidence", and lists what is relevant:

• your purpose or intention at the time you acquired the land, which is the only time that matters
• evidence from before you bought, including the whole acquisition process
• commitments you made or steps you took shortly after buying, especially if they contradict what you say you intended
• how long you held the land
• whether you have a pattern of buying and selling land within relatively short timeframes

The onus is on you. If Inland Revenue questions a sale, it is up to you to show that you did not acquire the land with a purpose or intention of disposal (paras 20 and 26). That is why the evidence you keep matters so much.

Some things that feel relevant are not. Changing your mind after you buy does not help (para 27), and nor does renting the property out and paying tax on the rent: both the rent and the sale profit can be taxed (para 29).

The evidence that helps

QB 25/08 para 46 lists the kind of evidence that can show you did not buy to resell:

• records from the real estate agent, or from the bank or lender that financed the purchase, about why you bought
• records of discussions with your accountant or financial adviser
• proof of a change in your circumstances that led to the sale
• minutes of board meetings
• resolutions of directors or trustees
• anything else that shows your purposes or intentions when you bought

What you told your lender is evidence for or against you. In Inland Revenue's Laura and Connor example, the couple had told their bank they planned to renovate and sell.

Because a CB 6 sale can be taxed whenever it happens, para 47 says to keep this evidence "even beyond the normal 7-year timeframe for keeping tax records". In practice that means for as long as you own the land.

Inland Revenue's five examples

QB 25/08 ends with five examples. Each assumes the exclusions do not apply. Here they are in short:

Example 5 matters for investors: renting for a few years and then selling for a capital gain is still a firm intention to sell.

Common misconceptions

• "After 10 years it is tax free." No. There is no time limit under CB 6 (para 28).
• "I can gift it instead." No. A gift of land acquired to resell, including settling it on a trust, is treated as made at market value, and so is a sale below market value (paras 37 to 38).
• "I only sold part of it." If you bought the whole block to sell, every part is taxed whenever it is sold, even if you subdivide first (para 30). If you planned to keep one lot and sell the rest, only the part you meant to sell is caught, but you need good evidence of which part that was (para 32). Our subdividing land guide covers the other rules that can apply.

The two exclusions

Residential exclusion (s CB 16). If the land has a house on it, or you build one, and you occupy the house mainly as a residence, CB 6 does not tax the sale. It also applies where a trust owns the land and a beneficiary lives there. It covers related land up to 4,500 square metres, or more if the larger area is needed for reasonable occupation and enjoyment of the house. Your occupation cannot be incidental to a more significant purpose such as selling (paras 6 to 8).

Business premises exclusion (s CB 19). This applies to premises you acquired and occupied mainly to carry on a substantial business from. A property mainly used for investment, such as a rental, does not qualify (paras 11 to 13).

Neither exclusion is available if you have a regular pattern of buying and selling, or building and selling, houses or business premises (paras 9 and 14).

Worked example: a renovation plan that became a rental

Say you signed to buy a house in 2015 for $520,000, paying $4,000 in legal costs, planning to renovate and sell, and you told your lender so. You spent $60,000 on capital renovations, then decided to rent it out instead and paid tax on the rent each year. In 2026 you sell for $790,000, paying $22,000 in agent and legal fees, with settlement in the 2026/27 tax year. Your other income for the year is $85,000.

The bright-line test does not apply: you held the house far longer than 2 years. But on these facts the intention test does. Using this site's engine:

The profit is added to your other income and taxed at your marginal rates, exactly as a bright-line gain would be. Our guide to how the gain is taxed explains the bracket split. The interest, insurance and repairs you paid while renting were deductible against the rent in each year, as QB 25/08 para 45 describes, so they are not deducted again here. Our deductible costs guide has more on what counts.

If the evidence instead showed you bought to rent long term, with no firm plan to sell, neither CB 6 nor, after 2 years, the bright-line test would apply.

Deductions, losses and what to do next

When CB 6 applies, you deduct the cost of the land and any capital improvements in the year you dispose of it, which in a typical sale is settlement. Holding costs such as interest, insurance, and repairs that are not capital are deductible in the year you incur them, to the extent they are not private (paras 43 to 45).

A loss on land sold under the land sale rules can be used against bright-line profits and other taxable land sale income. Inland Revenue's Zac example in IR1229 uses a bright-line loss to reduce a later intention test profit. Our ring-fenced losses guide explains the limits.

If you think you may have taken the wrong position on a past sale, QB 25/08 para 50 suggests talking to a tax adviser or Inland Revenue and considering a voluntary disclosure.

To see which rule is likely to apply to your sale, try our Is my gain taxable? checker. It checks intention and dealing before the bright-line test, as the law does. Builders and developers face separate rules, listed in our overview of what NZ taxes.

Questions people ask

Is land I bought to resell still taxed if I hold it for more than 10 years?

Yes. If you acquired it with a firm purpose or intention of selling, section CB 6 taxes the profit whenever you sell. Inland Revenue calls the 10-year idea a common misconception.

Does selling need to be my main reason for buying?

No. For land, it is enough that selling was one of your purposes, as long as it was firm and not a vague possibility. Shares and crypto use a main purpose test instead.

If I change my mind and rent the property out, am I off the hook?

No. Only your intention at the time you acquired the land counts. Renting it out, and paying tax on the rent, does not stop the sale profit being taxed.

What if I live in the house?

The residential exclusion stops CB 6 applying if you occupy the house mainly as a residence, unless you have a regular pattern of buying and selling houses. Its tests differ from the bright-line main home exclusion.