In land transactions, a simple and careful division of properties and building activities is one of the most common tricks of the trade used by a lot of people to prevent their properties from being tainted.

People in IRD see this as a major weakness in the world of legislation. This is why the new rules, in terms of associated person’s tests, are promulgated to cover up for this loophole.

The new tainting rules are set to give a better and wider test in carefully associating two properties or companies. If the property is tainted, the capital gains that supposedly are not subject to income tax will now be subject to income tax if the sale occurs within 10 years of acquisition or, in some cases, within 10 years of the completion of improvements.

These new rules are made to be very comprehensive and effective. Attempts of restructuring your business just to avoid paying taxes will end you up in more trouble. Today, people in IRD can now monitor any attempts to structure property dealing and developments as tax avoidance. Thus, using Trading Trusts do not prevent association anymore, unlike before. As a matter of fact, the rules are so comprehensive that if you are on the process of acquiring a property after October 6, 2009, you end up getting more chances of having your acquired property tainted.

One important thing that property investors need to carefully consider in line with the new tainting rules is that association with a certain dealer or certain developer needs to take place on the very same day the investment property is acquired. Otherwise, your second property will end up being tainted.

If you are acquiring property, these new rules will certainly have a big impact in your business. You must seek advice to be guided accordingly.