Associated persons

The associated persons rules in the Income Tax Act 2007 determine when two or more people or entities are treated as connected for tax purposes — which can make a property sale taxable that would otherwise not be.

Why they matter so much

You can be caught by someone else's occupation. If you are associated with a builder, developer or property dealer, land-sale rules that apply to them can apply to your transactions — even where you personally have no connection to the industry.

This is one of the most under-appreciated tax risks in New Zealand property.

The main tests

• Two relatives test — individuals connected by marriage, civil union or de facto relationship, or within two degrees of blood relationship (siblings, parents, children)
• Tripartite test — if A is associated with B, and B with C, then A can be associated with C
• Various company, trust and partnership tests

Worked scenario

Your brother is a property developer. You buy a section, hold it, and sell it at a profit some years later with no development intent of your own. Because you are associated with him, the developer land-sale provisions may apply to your sale — and the profit may be taxable regardless of your intent or holding period.

Common misunderstanding

Associated persons rules operate independently of the bright-line test. Passing the two-year test does not protect you.

The connection can be indirect. The tripartite test means association can pass through an intermediary in ways that are not obvious.

If anyone in your immediate family is in the building or development trade, get specific advice before buying land or doing anything resembling a development. This is not a general-reading topic.

Related terms

Sources

• Income Tax Act 2007; IRD guidance on associated persons

Last reviewed: 1 August 2026 · General information only, not tax advice.

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