A main home is the property where you live.
You're unlikely to have to pay tax on any profit when you sell unless:
- you have a pattern of buying and selling your main home
- the sale is within the bright-line property rule period
- you are in the business of or you are associated to property dealers, developers or builders.
The main home exclusion
Even if you bought your main home with the intention of selling it, or you’re a property dealer, developer or builder, you won’t need to pay tax on when selling the property if both of the following apply:
- you bought land with a house on it, or built a house on it
- the house is occupied mainly by you and any family member living with you.
However, the main home exclusion will not apply if you have a regular pattern of buying and selling, or building and selling, your main home. In this case you’ll need to pay tax on any profit when you sell the home.
Residential properties held in trust
Residential properties held in trust can apply the bright-line main home exclusion if the following applies:
- the house sold was the main home of the principal settlor of the trust, or the principal settlor does not have a main home
- it was the main home of a beneficiary of the trust.
The principal settlor is the person who has made the biggest financial contribution to the trust, ie their settlements to the trust have been greatest by market value.
Talk to your tax advisor if you need advice.
Example: Jason and Kevin each buy a main home
3 years ago, Jason and Kevin each bought a main home
When it comes to selling their main homes, one of them has to pay tax and the other does not.
Jason is a residential property dealer and over the past 6 years, he has bought and sold 4 houses. He's always lived in the properties with his partner. Because Jason has a regular pattern of buying and selling residential property, any profit he made from selling his homes will be taxable.
Kevin sold his last main home more than 5 years ago and the one before that 10 years ago. Because this is Kevin's main home and he does not have a regular pattern of buying and selling residential property, he will not have to pay tax when he sells his main home.
Example: Anika owns a 3 story house
Does the main home exclusion apply when you rent part of the property you live in?
Anika owns a 3 storey house. She lives on the 1st floor and rents out the other 2 floors.
If Anika sold the property within the bright-line period, she cannot use the main home exclusion because more than 50% of the property is rented out.
Example: Trevor has 2 homes
Deciding which is your main home when you own more than 1 property
Trevor has 2 homes. His first home is a small apartment in Christchurch, he spends 4 days a week there while he works in Christchurch.
His second home is in Wellington, where his family lives. Trevor lives in his Wellington home on the days he is not in Christchurch. He is a member of the local tramping club and is on the Board of Trustees of his son's school in central Wellington.
The Wellington home is Trevor's main home as it is the place he has the greatest connection with.