Like most property owners you have probably heard about the bright-line test but not necessarily understood how and when it could apply. We have been noticing an increase in queries from clients about how this property rule applies to their own situation.
Put simply, bright-line says people who sell a house in New Zealand within a specified number of years of buying it, must pay income tax on any gains, unless it's their main home or another exception applies. Originally this period was two years and since 29 March 2018 this has increased to five years.
The bright-line rule is a clearly defined rule that leaves no room for interpretation. You can think of it as someone drawing a line in the sand. It's clear when you cross that line.
To help you understand and navigate this relatively new area of property tax rules, below are a range of questions and answers as provided by the IRD.