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A property will not be taxable under the bright-line test if you meet 1 of the following exclusions:

  • it's your main home and your use meets certain criteria
  • it’s used predominately as business premises
  • it’s being used as farmland or capable of being used as farmland.

Main home

Your main home is the property where you live for most of the time. If you have more than 1 property it is the property you have the greatest connection to. You cannot have more than 1 main home.

Which property is your main home depends on:

  • the amount of time you live in each home
  • where your immediate family lives
  • where your personal property is kept
  • where your social ties are strongest
  • your use of the home
  • what other ties (for example: employment, business, economic) you have with the surrounding community.

Main home exclusion criteria

You can claim the main home exclusion if you:

  • used more than 50% of the property’s area as your main home (including the yard, gardens, and garage)
  • lived in the property as your main home for more than 50% of the bright-line period.

If either one of these is less than 50%, then the main home exclusion does not apply, and you will need to pay tax on any profit when you sell it.

For example, if you use 40% of a property as your main home and rent out 60% as a flat, you cannot use the main home exclusion when you sell that property.

For properties sold before 1 July 2024, different criteria apply depending on when you acquired the property.

Property sold before 1 July 2024

You must have lived in the property as your main home

It's important to note that having the intention to use the property as your main home is not enough, you must have actually used it for this purpose.

The exclusion will also not apply when only a family member and not the owner has used the property as their main home.

The property does not need to have been used without interruption. For example, a main home can be rented out for short periods while you are on holiday or before settlement of the sale of the property, as long as the total time it is used as your main home is more than the total time it is not used as your main home.

Construction period

When you build a new home, you can ignore the construction period when determining if your usage of the property qualifies for the main home exclusion.

Only look at your usage before construction began, and from when construction was completed to when the property is sold.

Construction is the work to build the home and includes the design phase. Construction is usually considered complete when the code compliance certificate is issued under the Building Act 2004.

Example: Off the plan and construction delays

In December 2020, Ben purchased a property off the plan in a new development. Construction was due to be completed in early 2022, but due to delays, construction was not completed until June 2023.

Ben moved into the property immediately following settlement in June 2023 and used it as his main home until he sold it in December 2024.

Ben can ignore the 30-month construction period and only look at the period from June 2023 to December 2024 when determining whether he qualifies for the main home exclusion. He qualifies for the main home exclusion because he lived in the property as his main home for the whole period.

Any profit on the sale is not taxable under the bright-line test.

Limits to claiming the main home exclusion

The main home exclusion does not apply when you:

  • have a regular pattern of either buying and selling or building and selling your main home (even if you or your family live in the property before it is sold)
  • have already used the main home exclusion twice over the 2-year period immediately before you sold your main home.

Main home held in trust

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

  • 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.

If a principal settlor of a trust has a main home that is not the one being sold by the trust, the main home exclusion cannot apply to any property owned by the trust.

Rollover relief and the main home exclusion

When residential land is sold and rollover relief applies, the usage of the last owner is considered and attributed to the new owner to work out if the main home exclusion applies.

For properties sold on or after 1 July 2024, rollover relief extends to transactions between associated persons.

For more information about rollover relief and when it applies.

Ownership transfers and rollover relief 


Example: Rollover relief and the main home exclusion

Hamish and Jess bought their first family home in July 2024 and settled the property on the HJ Family Trust. They lived in the property for 12 months and transferred the property to another trust, H & J Family Trust, which they are also settlors of.  H & J Family Trust rents out the property and after 6 months the property is sold.

The 12-month period that Hamish and Jess lived in the property is attributed to H & J Family Trust. The main home exclusion will apply because the property was lived in for more than 50% of the time (12 out of the 18 months).

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Last updated: 04 Jul 2024
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