What is the bright-line property rule?
The bright-line property rule means that people who sell a residential property might need to pay income tax on any profit.
Whether it applies to your property and what bright-line period applies if it does, depends on when you acquired the property. In most cases, the date your property is acquired is when the sale and purchase agreement you signed to acquire your property became binding.
A bright-line period starts on the date you bought the property which is the date the property's title is registered with Land Information New Zealand (LINZ) (generally the settlement date) and ends when you enter into a binding Sale and Purchase agreement to sell the property.
If you acquired the property before 1 October 2015, the bright-line property rule does not apply.
If you acquired the property between 1 October 2015 and 28 March 2018 (inclusive), the bright-line property rule may apply if you sell it within the 2-year bright-line period.
If you acquired the property between 29 March 2018 and 26 March 2021 (inclusive), the bright-line property rule may apply if you sell it within the 5-year bright-line period.
Property acquired on or after 27 March 2021 will be treated as having been acquired before 27 March 2021, if the purchase was the result of an offer the purchaser made on or before 23 March 2021 that could not be withdrawn before 27 March 2021. This means that the 5-year bright-line period applies.
When the bright-line property rule does not apply
The bright-line property rule does not apply when:
- the property is your family/main home and the main home exclusion applies (the rules that determine what a main home is are different for property acquired before, and for property acquired on or after, 27 March 2021)
- you inherited the property
- you're the executor or administrator of a deceased estate.
The bright-line rule does not replace existing property tax rules. You might still need to pay tax on your property profits even if the bright-line rule does not apply.
If you sell a property that falls under the bright-line rule, then you'll need to complete an income tax return and a Property sale information form - IR833 at the end of the tax year. If you have a tax agent, they'll be able to help.