Bright-line Property Rule

The full commentaries in the By Lawyers Sale of Real Property and Purchase of Real Property publications have been updated in line with amendments to the bright-line property rule that took effect on 1 July 2024.

The rule applies to NZ tax residents selling residential property in NZ or overseas, other than their main home, within a prescribed period after having purchased it. If the sale is within the bright-line period, the vendor is taxed on any profit made from the sale, unless full or partial rollover relief is available.

For sales before 1 July 2024 the bright-line period was:

• Five years if the property was purchased between 29 March 2018 and 26 March 2021; or
• Five years for qualifying new builds or 10 years for other residential property if the property was bought on or after 27 March 2021.

For sales after 1 July 2024, the bright-line period is two years from the date of purchase.

From 1 July 2024 to be eligible for the main home exemption:

• more than 50% of the property’s area must be the main home, and
• the property must be used as the main home for more than 50% of the time.

A further change effective 1 July 2024 allows rollover relief for any transfer to an associated person, which includes:

• associated companies, or a person and an associate company;
• relatives within two degrees of relationship;
• trusts and settlors, beneficiaries, and related trusts;
• partners and a partnership;
• a look-through company and an owner of that company.

This rollover relief is limited to persons who are associated for two years before the transfer, and it can only be claimed once in any two-year period.

See the By Lawyers Sale of Real Property and Purchase of Real Propertycommentaries for further information.