Rollover relief means you won’t be taxed at the time of the transfer, but we treat you as having purchased the property at the same time and for the same price as the person you received it from. This means the bright-line property rule looks at how long both of you held the property for.
Rollover relief is available for property that has been transferred:
- under a relationship property agreement
- on the death of a person to an executor or administrator of an estate
- under a resident’s restricted amalgamation.
The subsequent sale of inherited property by an executor or administrator of an estate, or the beneficiary, is not subject to tax under the bright-line property rule.
From 1 April 2022, the following changes in legal ownership may also qualify for rollover relief:
- transfers to or from look-through companies and partnerships
- certain transfers to or from qualifying family trusts
- transfers within tax consolidated groups of wholly-owned companies
- certain transfers of land subject to the Te Ture Whenua Māori Act 1993 and transfers as part of settling Treaty of Waitangi claims
Rollover relief for these new categories is provided if the amount received for the transfer is equal to or less than the original owner’s acquisition cost.
If the amount for the transfer is more than the original price, you may have some tax to pay on the transaction, but the amount of tax may be limited.
No relief for transfers from parents to children
Rollover relief does not extend to parents helping their children own their first home. If parents are co-owners and later sell their share to their children, the bright-line property rule applies.
Rachel and Ross purchased a home for their daughter Emma and her partner Joey using the equity in their own home. Emma and Joey were responsible for all outgoings and maintenance and planned to buy it themselves eventually.
A separate bank account was set up for the mortgage repayments which were paid by Emma and Joey. Any equity gained in the property was for Emma and Joey.
Rachel and Ross 'gifted' the property to their daughter and son-in-law after 3 years and within the 10 year bright-line period. Rachel and Ross were the legal owners of the property and because they were not living in the home, they are unable to claim the main home exclusion.
The transfer of ownership is at market value and because the bright-line property rule applies, any gain on sale is taxable.