The Issues Log

Section / Provision Income Tax Act 2004

CB 6(1)(c) and CB 9(1) and (2)

Date Received

The omission of the minor nature clause from CB 6(1)(c) and CB 9(1) and (2) results in an unintended change.  The implication of the removal of this reference to work of a minor nature is that the 2004 act now taxes a larger number of land sales than the old act.  Should a builder or an associate complete a minor improvement to a property and dispose of the property within 10 years the disposal proceeds will be assessable for income tax.

Consider the following example:  A taxpayer who is a builder replaces a faulty light switch with a dimmer function.  He subsequently sells the rental property within 10 years of replacing the light switch.  The switch is an improvement on the old switch.  Under the 2004 act the sale of the rental property is taxable, as the builder has improved the property.  However under the old act, the switch replacement would qualify as a minor improvement and the disposal proceeds would not be taxable.

CD 1(2)(d).  Section CD 1(2)(d) taxes amounts from the sale of land where the taxpayer, or an associated person, carried on the business of erecting buildings an the taxpayer or the associated person carried out any improvements to the land, being improvements not of a minor nature, and the land was acquired for the purpose of the business or the improved land was sold or disposed of within 10 years after the date on which the improvements were completed.

The Panel considers that there is no unintended legislative change under sections CB 6(1)(c) and CB 9(1) and (2) of the Income Tax Act and therefore no amendments are required in respect of the Income Tax Act 2004.