In 2015, the government introduced the
"bright-line test", a method which attempts to tighten the property investment
The bright-line test states that
(subject to exemptions) any gain from disposing of residential land within two
years of acquiring it will be taxable. The test only applies to residential
land. Residential land is land that has a dwelling on it or could have a
dwelling on it and does not include farms or business premises.
bright-line test applies where a person's "first interest" in residential land
is acquired on or after 1 October 2015. Generally, a person acquires their
"first interest" on the day they enter into an agreement to purchase
residential land. The start and end dates may vary depending on the
circumstances of each transaction.
For standard sales, the two year
bright-line period starts when title for the residential land is transferred
to a person under the Land Transfer Act 1952 and ends when the person signs a
contract to sell the land. In other situations, such as gifts, the date of
"first interest" is the date the title is registered by the donor and the end
date is when the donee acquires registered title.
In simple terms, when a person purchases
their main home after 1 October 2015 and then sells it within two years, the
income they receive for the sale is not taxable. A person can only have one
main home to which the bright-line test does not apply. If a person has more
than one home, it is the home that the person has the greatest connection with
that is considered the main home for the purposes of the test. Factors to
assess when determining what constitutes a main home include; how often a
person uses the home, where their immediate family is, where their social and
economic ties are and whether their personal property is in the home.
The test is based on actual use of the
property and not just a person’s intention to use the property as a main home.
This exemption cannot be applied on a proportionate basis; therefore, if a
house is used only partly as a main home, the exemption does not apply. Where
a main home is held in a trust, the exemption is usually available; however,
additional information is required to ensure trusts are not used to avoid tax.
Inside this edition
The Human Tissues Act
I have been named an executor of a will,
what do I do now?
A habitual seller cannot use the main
home exemption. If a person has used the main home exemption more than twice
in the previous two years at the time of selling their property, they are
considered a habitual seller. A habitual seller also includes a person who
regularly acquires and disposes residential land. Where property is inherited
by a person as a beneficiary and they subsequently sell the property, the
disposal will not be subject to tax under the bright-line test. Where property
is transferred between partners or spouses under a property relationship
agreement, there are no tax implications. However, if the property is
subsequently sold; the bright-line test may apply.
There have been cases where tax
obligations arose through the disposal of residential property which did not
result in financial gain to the seller. As a result, it is highly recommended
that specialist advice is obtained in respect of all property transactions.
Until we are
confronted with death, an emergency or illness, few of us are likely to turn
our minds to the interplay between the law, and how it affects the way we deal
with a loved one’s remains, let alone the choices we make or leave in respect
of our own bodies.
Tissue Act 2008 ("the Act") currently governs the way human tissue is dealt
within New Zealand. Under the Act, Human Tissue ("tissue") is defined as
including any material that is, or is derived from a body or material
collected from a living individual. The definition is wide reaching and
encompasses amongst other matters an individual’s organs, blood, skin or stem
cells. Human embryo's, including female eggs and sperm only qualify as human
tissue in certain instances, including where human tissue is collected for
non-therapeutic purposes or in relation to exporting or importing human
provides for compromise in its framework, by facilitating an 'opt in'
approach. Informed consent or an informed objection may be given by the
individual whose body the tissue may be collected during their life and upon
death. Where no informed consent has been given or no informed objection has
been raised, the Act provides a hierarchy of who may consent to tissue being
collected from the body of a deceased, including an individual’s nominee(s),
immediate family and then a close available relative.
assumptions exist within the Act, including:
a) that an individual over 16 years of age is capable of making an informed
b) consent or objection is free and informed, immediate family members
providing consent have undertaken consultation with other immediate family
c) that the individuals have taken into account the cultural beliefs of their
context for decision making in respect of donating or collecting tissue is
woven throughout the Act. There is a requirement and expectation on those who
collect human tissue, that they will take into account the spiritual needs,
values and beliefs of the individual and their immediate family. Potential
donators are encouraged to consider the impact that their decision will have
on their family following death.
In respect of
expressing consent, certain obstacles exist in conveying ones wish to be a
donor. We are likely to be familiar with the 'donor' indications on a driver
licence. However, ticking the 'donor' box on a driver licence may not meet
accepted requirements for obtaining informed consent. This is primarily due to
the contention that a driver licence has a life span of 10 years, and it may
not reflect an individual's wishes at the time of death. In contrast, a Will
provides the unequivocal wishes and intentions of a deceased person including
an expression of consent.
The issue of
expressing consent by way of a person's Will is that it may not be practical
and timely to ascertain certainty around the intention and consent of the
deceased in times of emergency, or where a timely decision is required. The
Act has attempted to alleviate this problem by providing an 'opt-in register',
where consent may be given after the fact and at a later date.
When a loved one passes away it can be a
stressful time for the family, which can be made more difficult when the
deceased has not left a Will. Where the deceased has left a Will they will
have named their executor or executors (their representative(s) in that Will.
The role of an executor is to administer
the deceased's estate. This may include settling outstanding debts owed by the
deceased, and distributing the deceased's estate in accordance with the
Before an executor can administer the estate of the deceased, they must first
What is "probate"?
Probate is a court order determining the Will of the deceased as being true
and authentic. The executor(s) is/are appointed in this order. Upon the making
of the order, the executor(s) then has/have the legal authority to deal with
the deceased’s estate.
How do I apply for probate?
The executor(s) named in a Will must make an application in writing to the
Wellington High Court for probate. The application must be in a specific
format, as prescribed by a set of rules called the High Court Rules.
An application for probate may be filed in one of two ways either by way of
"probate in common form" or by way of "probate in solemn form".
An application for "probate in common form" is usually made on a "without
notice" basis, where the application is made without notifying anyone else, on
the basis that no one will contest the Will.
In the event that it is highly likely that someone will contest the Will, an
application for 'probate in solemn form' will need to be filed. In these
circumstances the relevant parties will be notified of the application and a
trial at High Court will proceed, for which the parties will probably need
What would I need to make an
application for Probate?
The High Court application fee for obtaining Probate is currently $200.00;
this would need to be paid together with the filing of the following
* The original Will (not a copy);
* An application for probate in common or solemn form;
* A sworn statement (affidavit) from the executor(s) which includes the
* The person who made the Will has died;
* They knew the deceased;
* Where the deceased was living when they died; and
* Confirmation that the Will is the deceased's last Will.
How long does this process take?
If the Application has been drafted correctly, in the prescribed from, and
filed acceptably with the Wellington High Court, it may take four to six weeks
to process the application. However, it could take longer if the High Court is
busy or the application is complicated.
This timeframe may also be drawn-out in the event that the application has not
been drafted correctly and/or the High Court raises issues with the
application. Delays of this nature have the potential to cause a number of
problems between the beneficiaries, and can affect an executor's ability to
administer the deceased's estate, particularly if immediate action is required
(which it often is).
With that in mind, legal advice should obtained when making an application for
The Companies Act 1993 ('the Act')
provides the framework that applies in respect of directors' duties and
reckless trading. The Act prohibits a director from allowing the business to
be carried on in a manner likely to create a substantial risk of serious loss
to the company's creditors. Any director who fails to exercise necessary care
or prudence may be found personally liable for reckless trading.
New Zealand’s largest award against a director for reckless trading was made
out in the Lower v Traveller  NZSC 79 case. The High Court in this
particular case (and subsequently the Court of Appeal) determined that the
director was responsible for $8.4 million in damages.
Reckless trading refers to a director taking illegitimate business risks. In
determining the legitimacy of such risks, an objective assessment is
undertaken, with focus on the way the business is done, and whether the
director's methods have created a substantial risk of serious loss.
The courts have stipulated that a director's "sober" assessment of the ongoing
character of the company and its likely future income prospects is required
when a company hits troubled waters.
A two pronged approach to determine a director's liability has been adopted,
firstly whether there should be liability, and if required, what relief is
Material factors to assess that a
business risk is legitimate include whether:
(a) The risk was fully understood by those whose funds were at risk;
(b) The company was insolvent and continued to trade over an extended period;
(c) The director's conduct was normal, in its ordinary course of business; and
(d) The primary persons interested in the insolvent company are the creditors
rather than the shareholders.
Liability for reckless trading
can relate to an isolated transaction. The company does not need to be in
liquidation and no knowledge of the reckless trading is required.
There are limitations to the Act. The courts have found that recklessness
requires more than mere negligence; and a director must either be willfully
negligent or make a conscious decision to allow the business to be conducted
in a manner that causes substantial risk of serious loss to the company's
creditors. A director may also avoid liability where a director has the full
support of the creditors and the creditors were fully aware of risks which
were incidentally substantial.
One of the criticisms of reckless trading is that it does not allow for high
risk company trade where there are prospects of large profit margins. Some do
not consider this point well founded, as arguably a risk of loss is reasonably
balanced by a prospect of gain. It appears this point is yet to be decisively
settled at common law. The wording of the Act does not leave room for a
balancing exercise, however the Courts have acknowledged certain academic
articles which analyse the duties of directors under the Companies Act 1993,
proposing their preparedness to apply such an assessment to balance risk and
The In April 2016, Uber (the private
passenger service operating via a social media smartphone application) came
under fire from the New Zealand Government, amidst fears that Uber was
changing its rules by dropping its requirements to have a passenger
endorsement for their licensed drivers or a certificate of fitness for their
cars. Uber was able to do so via some gaps in the relevant law. It was clear
that the law was unable to manage this new and fast growing development.
It transpired that Uber drivers were not legally required to carry any
licenses or endorsements which were imposed on ordinary taxi drivers. As a
result Uber drivers had lower overheads and were not obliged to follow any
formal regulations, despite the fact that they provided services almost
identical to those offered by taxi drivers. This fact was clearly a concern
for taxi drivers.
Further, and more concerning for the general public, Uber was legally
permitted to engage drivers who were convicted of serious crimes, or who were
medically unfit to drive to carry passengers. The law was in need of
modernisation and on 12 September 2016, Transport Minister Simon Bridges
introduced the Land Transport Amendment Bill to Parliament in an effort to
update the law applying to small passenger services, update the rules for
heavy vehicles and generals improve road safety.
The Bill, together with amendments to land transport rules
and regulations, aims to provide direction and much needed guidance to
encompass new technologies including smartphone apps. The effect of
modernising these regulations by way of the Bill would ensure that they are
flexible enough to accommodate new business models, while managing safety
The proposed changes aim to ensure an effective small passenger service sector
making services offered by that sector safe and accessible; improving the
effectiveness of the transport system and helping to reduce congestion.
The overarching purpose of the changes is to encourage innovation in transport
while managing safety risks to drivers and passengers.
To achieve these lofty goals, the Bill makes it an absolute requirement for
all transport service drivers to be licensed. Currently drivers seeking to
obtain a 'P' endorsement license (Passenger Endorsement License) must hold a
passenger endorsement certificate allowing the driver to be "hired" and the
change will mean that Uber drivers must do the same.
In addition, Uber drivers will need to, as part of obtaining the passenger
endorsement certificate, undergo a "fit and proper person check", which is
repeated every year by NZTA. The check examines things such as traffic
offending, previous complaints, serious behavioural issues, and always
includes a police check for criminal offending, including overseas
The Bill has made it through its first reading in Parliament (15 September
2016) and appears to be on track to become law relatively soon. In any event
it is likely that the New Zealand Government will look to implement updated
legislation and regulatory requirements in other industries in order to meet
the demands of existing and future disruptive emerging services. It would
appear that Uber has become a much needed catalyst for legislative
Historically, the term 'chain' has
been used to express a unit of measurement in respect of land and distance.
Coincidently, the "Queen's Chain" describes the kilometres of Crown land which
exists throughout New Zealand to provide the public with access to coastlines,
rivers, lakes and native bush.
In reality, the Queen's Chain is a term describing what is now generally
accepted as the marginal strips of land or esplanade strips, which are
normally 20 metres wide and adjoining many lakes, rivers and the foreshore. It
can also include land which has been retained by the Crown for conservation
purposes. These lands are usually controlled by the Department of
Conservation. In some instances, this means there are restrictions on public
access. These restrictions are most commonly imposed to protect sensitive
areas or endangered animals.
However, there is still a large amount of privately owned land around New
Zealand which is not owned by the Crown. The private rights attached to such
land are referred to as "riparian rights" and usually extend well into the
water, granting unrestricted access to the owner. In any event, whether the
land is considered to be part of the "Queen’s Chain" or privately owned,
government imposed legislation still applies.
The Queen's Chain becomes a topic of contention when it comes to public access
to waterways and bush and there is often an assumption that the Queen's Chain
applies; when in many cases the adjacent landowner actually holds riparian
rights. Archives New Zealand holds records for all Crown land (including land
subject to the Queen’s Chain) which can be ordered and/or viewed in person.
Information on accessing such records may be at this address:
The Office of the Ombudsman is an independent authority
which handles complaints and investigates New Zealand's government agencies.
Investigations are initiated following receipt of a complaint or on the
Offices' own initiative to address wider administrative issues.
The Office manages complaints from individuals about the decisions and
administrative acts of government agencies including district health boards
and local government. This includes official information complaints which
arise where a request is made to a government agency. This may be to obtain
information and the applicant is not happy with the response, or the
information is not provided within 20 days.
On receipt of a written complaint, the Office may either resolve it without
further investigation or investigate further and form an opinion on whether or
not the agency has acted unreasonably. Agencies are not required to implement
the Offices' recommendations; however, usually they are accepted. The Office
also provides guidance and training to agencies before they implement policies
to mitigate future complaints against them by the public. Complaints relating
to private individuals or decisions by tribunals and courts are amongst some
areas that are outside the Offices' jurisdiction.
The Office may refuse to investigate a complaint if alternative remedies are
available, if the complaint is over a year old, if the complainant lacks
standing, or if the complaint is made in bad faith.
The Office provides a valuable and vital public service. More information on
the Office, its services and how to access them may be found at this address:
If you have any questions about the newsletter items,
please contact me, I am here to help.
Scannell & Co - 122
Queen Street East, Hastings
(06) 876 6699 or (021) 439567 Fax: (06) 876 4114 Email:
information in this newsletter is to the best of the authors' knowledge true
and accurate. No
liability is assumed by the authors, or publishers, for any losses suffered
by any person relying directly or indirectly upon this newsletter. It
is recommended that clients should consult S J Scannell & Co before
acting upon this information.
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