Brightline Test – where do you stand?

In an effort to cool the housing market, the government introduced a “bright-line” test for the taxation of gains from the disposal of residential land acquired and disposed of within two years (subject to some exceptions such as your main home).

The test is aimed to deter property speculation, and to make the property market accessible to the first home buyer. As stated above the test does not apply to your main family home.

The bright-line rule applies to the sale of any residential property (that is not your main residential home) you’ve bought on or after 1 October 2015 as follows:

  • if you bought a residential property between 1 October 2015 to 28 March 2018, inclusive: the two- year bright-line rule applies.
  • if you bought a residential property on or after 29 March 2018: the five year bright-line rule applies.

But whenever you buy a property intending to resell it, you’ll need to pay tax on any profit you make when you sell that property.

There are extra rules regarding when the clock starts ticking for when you “acquire” the property and “dispose” of the property.

If you would like to discuss any potential liability under the bright-line test, please get in touch with Claire Gibson on 07 949 7879 or email claire@foundationlegal.co.nz