What do bright-line test rules mean for those buying residential homes?
The bright-line property rule means that people who sell a residential property within a set period after acquiring it may need to pay income tax on the profit made. The Government has recently announced an extension of the bright-line period from 5 years to 10 years.
This means if you sell a residential property acquired after 27 March 2021 within ten years of acquiring the property, you may be required to pay income tax on the profit.
There are some exceptions. The ‘main home’ exclusion test can be used when the home being sold has been used as a main home for the whole bright-line period. Inherited property will continue to be exempt from the bright-line rules. The Government has also indicated that it intends that new builds will continue to be subject to a 5-year bright-line period.
Different rules will apply depending on when you purchased your property. We can assist with checking dates to confirm the applicable bright-line period, and completing the Land Transfer Tax Statement for the IRD to ensure you are meeting your property tax obligations.
We have used Nick Earl for a variety of services recently and always find him great to deal with. He explains all the legal jargon well, and his team are well organised which makes the whole process easy for everyone involved.