The bright-line property rule does not apply to properties bought before 1 October 2015.
If you sell a residential property you have owned for less than 5 years you may have to pay income tax. This rule also applies to New Zealand tax residents who buy overseas residential properties.
Exclusions to the bright-line rule
When you sell property the bright-line rule does not apply to your main home, inherited property, or if you're the executor or administrator of a deceased estate.
The bright-line property rule
The bright-line property rule looks at whether the property was either:
- purchased on or after 1 October 2015 through to 28 March 2018 inclusive, and sold within 2 years
- purchased on or after 29 March 2018 and sold within 5 years.
Generally, the bright-line period starts on the date the property's title is registered with Land Information New Zealand (LINZ) and ends when you enter into a Sale and Purchase agreement.
If the property is in another country, the bright-line period starts on the date the transfer was registered under that country’s laws.
The bright-line period for properties purchased 'off the plans' where the title has not yet been issued begins when you sign the agreement to purchase the land.
Selling residential property after the bright-line period ends
If you sell a property outside the bright-line period, the bright-line rule will not apply to the sale. But the intention and other property sale rules will still apply.
Anytime you purchase property with the intention of selling it for a profit you must pay tax on the profit unless an exemption applies.
Residential land withholding tax (RLWT)
If you're an offshore person and have a sale subject to the bright-line property rule, a withholding tax will be deducted at the time of the sale.
The residential land withholding tax (RLWT) should be deducted at the time of sale by your conveyancer. There is no automatic main home exclusion for offshore persons.
Bright-line property sale information form
Complete this if you had a bright-line property sale during the year and you're showing the income from the sale in your tax return.
To work out if you may have to pay income tax on a property sale, use our property decision tool.