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When you dispose of residential land and rollover relief applies, the bright-line test 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:

  • as deceased estate and inherited property
  • under a relationship property agreement
  • under a resident’s restricted amalgamation.

Transfers between associated persons

From 1 July 2024, rollover relief applies to:

  • All transfers between persons that are associated, provided they have been associated for at least 2 years before the transfer date.
  • A transfer to a trustee of a trust in which all beneficiaries are persons that have been associated with the transferor for at least 2 years before the transfer date (other than infants that are less than 2 years old and persons that are associated due to a recent marriage or adoption), or charities.

Rollover relief applies to all transfers between associated persons listed below.

  • Companies with 50% or more common ownership.
  • A company and a person other than a company if the person has a 25% or more voting interest in the company.
  • Two relatives within 2 degrees of blood relationship.
  • A person and a trustee of a trust if a relative of the person is a beneficiary of the trust.
  • A trustee of a trust and a person who has benefited or is eligible to benefit under the trust.
  • A trustee of a trust and a trustee of another trust if the same person is a settlor of both trusts.
  • A trustee of a trust and a settlor of the trust.
  • A settlor of a trust and a person who has benefited or is eligible to benefit under the trust.
  • A trustee of a trust and a person who has a power of appointment or removal of the trustee.
  • A partnership and a partner in the partnership.
  • A look-through company and a person who has a look-through interest for the look-through company and who is a director or employee for the look-through company.

Use our Associated persons definitions for income tax purposes - IR620 guide to help you work out degrees of association in family situations. The bright-line test uses the ‘non-land rules’ for associated persons.

Limitations to claiming rollover relief

There is a limitation on the number of times rollover relief can be claimed for a property. It can only be claimed under the associated person rules once in any 2-year period from the date of the first transfer.

Transfers of Māori residential land to or from trusts

From 1 April 2022, rollover relief applies to certain transfers of land subject to Te Ture Whenua Māori Act 1993 and transfers as part of settling Te Tiriti o Waitangi - Treaty of Waitangi claims.

There are 4 categories of property transfer that may qualify.

  • Transfers by settlors of a Māori family trust to the trustees.
  • Transfers back to the settlors who first transferred the property to the Māori family trust.
  • Resettlement transactions, where the trustees of a Māori family trust resettle the property on a new, related trust.
  • Transfers to certain trusts if the land is part of the settlement of a claim under te Tiriti.

Part 3 of the Bright-line property tax - IR1229 guide provides more information and examples.

Rollover relief for transfers of property before 1 July 2024

The rollover relief rules work differently for transfers before 1 July 2024 between associated persons and transfers of Māori residential land to or from trusts.

Property sold before 1 July 2024

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 test.

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

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Last updated: 04 Jul 2024
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