If you sell a residential property you have owned for less than 10 years you may have to pay income tax on any gain on the sale, unless an exclusion or rollover relief applies. This is the bright-line property rule and it also applies to New Zealand tax residents who buy overseas residential properties.
The bright-line property rule does not apply to properties acquired before 1 October 2015.
Go to the ‘Property tax decision tool’ at the bottom of this page to work out if the property you are buying or selling is taxable under any of the property rules, including the bright-line property rule.
The bright-line property rule
The bright-line property rule looks at whether the property was acquired:
- on or after 27 March 2021 and sold within 5 years for qualifying new builds or within 10 years for all other properties
- between 29 March 2018 and 26 March 2021 and sold within 5 years
- between 1 October 2015 and 28 March 2018 and sold within 2 years.
Qualifying for the 5 year bright-line period for new builds
When a property is acquired
For tax purposes, a property is generally acquired on the date a binding sale and purchase agreement is entered into (even if some standard conditions like getting finance or a building report still need to be met). Full information on when a property is acquired is found in 'QB 17/02' on our Tax technical website.
The date you acquire property determines which bright-line period applies - whether it is for 2, 5 or 10 years.
This will also determine which set of rules relating to the main home exclusion will apply to your property.
Bright-line period start and end dates
The bright-line period generally starts from the date you bought the property which is the date the property’s title is transferred to you (generally the settlement date) and ends when you enter into a binding sale and purchase agreement to sell the property. For properties acquired off the plan, different rules apply.
Property acquired on or after 27 March 2021 is treated as having been acquired before 27 March 2021, if the purchase was the result of an offer the purchaser made on or before 23 March 2021 and that offer could not be withdrawn before 27 March 2021. This means that the 5-year bright-line period applies.
QB 17/02 Income tax - date of acquisition of land, and start date for 2-year bright-line test
Selling residential property after the bright-line period ends
The bright-line property rule does not apply if you sell a property outside the applicable bright-line period. But other property sale rules will still apply when you:
- bought the property and you had an intention to sell it
- you have a pattern of buying and selling or building and selling your main home
- or a person you’re associated with are in the business of property dealing, developing or building and the property was bought for the business.
Situations where the bright-line property rule does not apply
Generally, the bright-line property rule does not apply to a sale of property that has been your main home.
There are different rules that apply to your main home depending if it was acquired before, or on or after 27 March 2021.
Business premises and farmland are also excluded.
Exclusions to the bright-line property rule
Full or partial relief is available for certain types of ownership transfers.
Ownership transfers and rollover relief
The bright-line property rule does not apply if you’re the executor or administrator of a deceased estate or you inherited the property.
Transfers of deceased estate and inherited property
Inherited residential property
Residential land withholding tax (RLWT)
If you're an offshore RLWT person and have a sale subject to the bright-line property rule, a withholding tax will be deducted at the time of the sale unless a valid certificate of exemption is held.
The residential land withholding tax (RLWT) should be deducted at the time of sale by your conveyancer.
Residential land withholding tax (RLWT)
Bright-line residential property sale information form - IR833
Complete this if you had a bright-line property sale during the year and show the income from the sale in your income tax return.
Completing your income tax return and IR833
Complete a Bright-line residential property sale information form - IR833
To work out if you may have to pay income tax on a property sale, use our property decision tool.
Use this decision tool to help you work out if the property you are buying or selling is taxable under any of the property rules.Go to this tool