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When you dispose of residential land and rollover relief applies, the bright-line property rule looks at how long both you (the transferee) and the previous owner (the transferor) held the property for.

The previous owner is not taxed at the time they make the transfer.

You are treated as having purchased the property at the same time and for the same price as the person you received it from.

Rollover relief is available for property transferred:

  • under a relationship property agreement
  • under a resident’s restricted amalgamation.

Relationship property agreements

Rollover relief for certain transfers from 1 April 2022

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.

Whether full rollover relief (no bright-line tax to pay) or partial rollover relief (some bright-line tax to pay) applies to these new categories depends on whether payment is made for the transfer and if so, how much.

Full rollover relief applies if the amount you receive for the transfer is equal to or less than the previous owner’s (transferor’s) acquisition cost.

Partial rollover relief applies if the amount you receive for the transfer is more than the previous owner’s acquisition cost. Some tax may need to be paid on the transaction, but the amount of tax may be limited.

Transfers of residential land for family trusts

Te Ture Whenua Māori Act 1993 rollover relief

Co-ownership of property

When there is a change to the shares that co-owners have in residential property, or when a co-owner is added or removed, the disposal of the share that changes hands may come under the bright-line property rule.

The start of the bright-line period should reset only for the ownership share that has changed hands.

Bright-line property rule and co-ownership

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. 

Example: Gifting a property to a child

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.


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Last updated: 14 Apr 2023
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