Sale of Property - The BrightLine Test

Thinking of purchasing a second property with these great mortgage rates? Heard that New Zealand doesn’t tax capital gains? Watch out for the tax man! From 29 March 2018 if you purchase a residential property and flick it on within 5 years, you could be stung with a tax on your capital gain. 

Recently Parliament reviewed the “bright-line” test for selling residential properties and now properties generally need to be held for at least 5 years instead of 2 years before they can be sold without capital gains tax consequences.

The test was originally introduced to circumvent taxpayer intentions and require them to pay a tax on capital gains from property sales within the bright-line period. This increase means that profits made from the disposal of a residential property within 5 years after its purchase, will generally be taxable which includes properties held in Trusts.

Thankfully there are some exclusions, e.g. your main home, inheritance, divorce, or death. For more information regarding the “bright-line” test, contact your local BDO adviser.