Where you change from joint tenancy to tenancy in common, the acquisition date used for the bright-line property rule does not change and the bright-line period start date does not reset when the title is transferred.
This also applies if the change is from tenancy in common to joint tenancy. There is an example further down the page.
Changes in acquiring and removing additional shares in the same land
Where you acquired a share in residential land before 27 March 2021 and later acquire more of the same land on or after 27 March 2021, when the land is sold it will all fall into the bright-line period that applied at the time you acquired your first interest in the land. The original bright-line period starts from the date each increase in share takes place. See example below.
When co-owners divide the land they bought
Sometimes land is bought by more than 1 person. It is not uncommon in this situation for the co-owners to then subdivide the land and allocate the subdivided parcels to each of the co-owners based on how much of the original parcel they owned. This is known as partitioning.
There is an exclusion that applies if the value of the allocated properties under the partition matches the interests the co-owners had in the original undivided parcel of land. Their contribution to development and construction costs form part of that value.
Tony and Michael bought a rental property as joint tenants in August 2019. Two years later, they decide that if one of them dies, they want the share of the partner who dies to go to that partner’s children.
In June 2021, the title transferred to change their ownership of the property from a joint tenancy to a tenancy in common (50:50).
For the bright-line property rule to apply, there must be a disposal of residential land by either Tony, Michael or both of them. In this case, neither of them is treated as having disposed of land for the purposes of the bright-line property rule. Tony and Michael own the same land (the estate in fee simple) before and after the transfer.
Before the transfer, they each had an interest in the whole of the property and an equal separate share (that is, 50%). After the transfer, they each still have an interest in the whole of the property, and they each now have a 50% share. The acquisition date is not reset in June 2021 when the title transferred to change the form of co-ownership of the property.
If Tony and Michael dispose of the property in the future, the bright-line period starts in August 2019 when the property was first acquired by Tony and Michael.
Hina and Andy entered into a binding agreement to buy a rental property as tenants in common on 30 June 2018. Hina owns 50% and Andy owns 50%. Settlement was on 31 July 2018. Hina sells her shares to Andy on 31 August 2021 at market value. The title is transferred to Andy who now owns 100% of the property.
For the purposes of the bright-line property rule, Hina has disposed of her 50% interest in the land. This disposal is income under the bright-line property rule, as the disposal was within the applicable bright-line period of 5 years. Hina can deduct the amount she paid for her share of the property.
If Andy then sells the rental property shortly afterwards, he will also be subject to the 5-year bright-line period, because he entered into a binding sale and purchase agreement on 30 June 2018 to acquire the original share in the property. This determines which bright-line period applies (2, 5 or 10 years) for both shares Andy purchased. The 5-year bright-line period will apply as follows:
- 50% share purchased on 31 July 2018, if sold before 31 July 2023
- 50% share purchased on 31 August 2021, if sold before 31 August 2026.
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