The Bright-line Property Rule
The bright-line property rule means that if you sell a residential property you ’ ve owned for less than a specified amount of time , you may have to pay income tax on any capital gains you have achieved since purchase .
The bright-line period that applies will depend on when the property was acquired . Right now , the bright-line period is 5 or 10 years ( depending on the circumstances ), so if you have bought a residential property and are selling it before 1 July 2024 and within 5 or 10 years of owning it , you will have to pay tax on any capital gain ( outside of the excluded properties , such as your main home ).
The National-led government has since confirmed the bright-line timeframe will go back to two years from July 1 , 2024 onwards . This shorter bright-line period applies to all properties no matter when you bought them , not just properties bought after July 1 2024 .
Bright-line Property Rules ( Up to July 1 2024 )
• For properties bought after March 27 2021 , your bright-line period is usually 10 years
• If you bought a New Build , your bright-line timeframe is five years
• For properties bought between March 29 , 2018 and March 27 , 2021 , your bright-line period is five years
• For any properties bought before March 28 2018 , the bright-line rule no longer applies .
Bright-line Property Rules ( July 1 2024 onward )
• Every property will have a two-year bright-line timeframe
Bright-Line Exemptions
The bright-line property rule doesn ’ t apply to every property and is generally intended to capture tax on the sale of investment or additional properties only .
• Your Main Home : The bright-line rule does not apply to your main home , and you can buy and sell your main home without paying taxes . As you can only have one main home any additional properties , such as a holiday home , would be included in the rule if it were sold during the relevant bright-line period .
• Property bought before February 2018 : If you bought your property before February 2018 , you won ’ t have to pay tax under the bright line . The rule has either never applied to you or doesn ’ t apply any more because the time frame has run out . Once the rules change from July 2024 , and if you bought your property before July 2022 , you will be outside the bright line .
• Inherited Property : Generally speaking , the bright-line rule does not apply to inherited property , however , this is dependent on what happens next and your specific circumstances .
• Property Ownership of 10 + Years : If you buy a property and sell it more than 10 years later you will also not pay tax on the capital gains .
Due to the complicated nature of the bright-line property rule , different timeframes currently in place , and the circumstances that can affect the outcome ( e . g . inherited properties ), we recommend seeking professional advice to ensure you receive the latest information .
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