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main home  is the property where you live for most of the time, or if you have more than 1 property it is the one that you have the greatest connection to.

Generally, any profit you make on the sale of your main home is taxable when you:

  • have a regular pattern of buying and selling, or building and selling, your main home
  • or a person you’re associated with is in the business of property dealing developing or building and the property was for the business
  • sell it within the applicable bright-line period and the main home exclusion does not apply
  • have used the main home exclusion twice or more over the 2-year period immediately before you sold your main home.

The main home exclusion when you sell a property

Your main home will be excluded from the bright-line property rule if:

  • more than 50% of the property’s area is used as your main home (this includes the yard, gardens and garages), and
  • it was used as your main home for the time required during the applicable bright-line period.

The bright-line period starts on the date you bought the property which is generally the date the property's title is registered with Land Information New Zealand (LINZ) (generally the settlement date) and generally ends when you enter into a binding sale and purchase agreement to sell the property.

The main home exclusion applies differently depending on when the property was acquired. In most cases the date you acquire it is when the sale and purchase agreement to buy it became binding.

Property acquired before 27 March 2021

If you acquired your property before 27 March 2021 and sold it within the applicable 2 or 5 year bright-line period, and it was used as your main home for more than 50% of the time during the bright-line period, you’re covered by the main home exclusion.

Having the intention to use the property as you main home is not enough. You must actually have lived there.

You cannot use the main home exclusion if you used:

  • less than half of the land as your main home, or
  • your main home for less than 50% of the time during the bright-line period.

Property acquired on or after 27 March 2021

If you acquired your property on or after 27 March 2021 and sold it within the:

  • 5-year bright-line period for new builds, or
  • 10-year bright-line period for all other properties

and it was used as your main home for 100% of the time during the bright-line period, you are generally covered by the main home exclusion.

If the property has not been used as your main home for a continuous period or periods of 12 months or less during the bright-line period, you do not need to count the period(s) as a change-of-use – the days in the period are 'treated as' days the property was used as your main home.

If for any continuous period or periods of more than 12 months it was not used as your main home, then you may have to pay tax on a portion of any profit from the sale.

If you use less than half of the land as your main home, you can still use the main home exclusion but you are required to pay tax on any profit relating to the non-main home portion of the land.

The main home exclusion can also apply if you’re a:

  • trustee of a trust and one of the trust's beneficiaries lives in the property
  • property dealer, developer or builder or an associated person.

Residential properties held in trust

Residential properties held in trust can apply the bright-line main home exclusion if the house sold was the main home of a beneficiary of the trust and one of the following conditions applies:

  • the principal settlor does not have a main home
  • it is the main home of the principal settlor of the trust that is being sold.

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.

If you're unsure how the rules apply to your situation, talk to your tax advisor.

Example: Jason and Kevin each buy a main home

Three 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 under the bright-line property rule and the other does not.

Jason is a residential property dealer and over the past 6 years, he has bought and sold a number of 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 makes from selling his homes is now taxable.

Kevin sold his last main home more than 5 years ago and the one before that 10 years ago. Because this has been Kevin’s main home for the whole time during the bright-line period and he does not have a regular pattern of buying and selling residential property, he will not have to pay tax under the bright-line property rule when he sells his main home.

Example: Anika owns a 3-storey house

Does the main home exclusion apply when you rent part of the property you live in?

Anika owns a 3-storey house, built in the 1990s, that she bought in January 2020. She lives on the first floor and rents out the other 2 floors.

If Anika sells the property within 5 years, she cannot use the main home exclusion because more than 50% of the property is rented out.

Fact variation: Anika buys property in January 2022

If Anika sells the property within 10 years, she can still use the main home exclusion but will be required to pay tax on any profit relating to the 2 floors 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.

Last updated: 28 Apr 2021
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