As of 1st July 2024, properties sold after this date will only be subject to the rule if owned for less than two years, unless an exception applies (see below). The new Brightline test applies to all properties, so if your property currently has a Brightline period of five or ten years, it will be reduced to two years.
The changes to the Brightline test means properties purchased before July 2022 will no longer be subject to the Brightline test – and the owners can potentially save on average between $55,000 and $65,000 each in tax. This latest update to the parameters of the Brightline test underscore the importance for homeowners to stay informed about the Brightline test criteria and its implications for their property transactions and tax liabilities.
If one of the below exemptions apply to you, you will not be liable for tax when you sell your property:
1. Sale of the main family home**
2. Transfer of the property to an estate executor or administrator
3. Transfer of the property after the owner dies via sale or part of an inheritance
4. Transfer following a separation through a relationship property agreement
Rollover relief was brought in in April 2022, and recognises some transactions change legal ownership without changing the economic owner, so the legal owners adopt the purchase date from the economic owner. These transactions will not trigger the Brightline test. These include:
If you own a residential property or are planning to buy a house, either to live in, rent out or hold in trust, it’s crucial you seek legal advice prior to entering into a transaction. The Inland Revenue will automatically be notified once a transfer of a property has been completed. It’s important to have clarity about how the Brightline test NZ affects you to avoid being caught by an unexpected tax bill.
Weston Ward & Lascelles Ltd Christchurch law firm is a multi-disciplinary – Working in arears including Commercial, Wills, Trusts, Estate Planning, PPPR, Leases, Sale and Purchases, Family, Relationship Property, Franchise, Refinancing, Small Business law and a myriad of other areas. If you would like to discuss your circumstances, call us for a free no-obligation chat on 03 379 1740 or drop us a line by clicking here.