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Extension of Bright-Line Test for Residential Property

From 29 March 2018, the bright-line test that is used to determine if you have tax to pay on the sale of residential property has increased from 2 to 5 years.

If a person acquires a “first interest” in residential land (which generally is the date you entered into a binding unconditional sale and purchase agreement) on or after 29 March 2018 and sell it within 5 years, you’ll need to consider if it is taxable under the bright-line test.

Bright-line test Property Exclusions:

  • your main home
  • transferred as a part of an inheritance
  • transferred to you as an executor/ administrator of a deceased estate.
  • farmland or business premises.
  • home owned by a Trust may qualify under main home exemption if it is used by a beneficiary of the Trust, provided that a principal Settlor of a Trust does not have a different main home.

Overseas Land – This bright-line test is not just limited to land in New Zealand. It extends to “overseas land” as well.

Residential Land Withholding Tax (RLWT) may apply to your New Zealand property if sold to an offshore person.

Note: If a property was purchased on or after 1 October 2015 through to 28 March 2018, the bright-line test will look at whether the property was sold within 2 years.

Get in touch with us to discuss further.