The bright-line test fact sheet

The bright-line test

The bright-line tests are just one small subset of a wide range of provisions that will seek to tax land sales (refer to our Top Ten list – Land Provisions, coming in at number three). 

The bright-line test is basically an objective capital gains tax for residential land bought and sold within a defined timeframe. The bright-line rules have evolved from seeking to prevent property speculators from working within grey and subjective tax rules, to more complication. This includes extending time frames, new rules based on date of acquisition, and rules designed to encourage certain behaviour (such as increasing the land supply). 

In order to apply the test, you need to understand: 

  1. What test applies – two year, five year or 10 year 

  1. When the clock starts ticking; 

  1. When the clock stops; and 

  1. Are there any exclusions that might apply? 

This fact sheet will provide a broad overview of each of the above. 

Which test applies?

The rules have evolved over time – the tax net has widened with increases to the application time period. 

At the beginning 

The test was first introduced on 1 October 2015 and applied to residential land acquisitions on or after that date. Subject to exclusions, land bought and sold within two years of acquisition is subject to tax. 

Starting to walk 

Not quite a teenager, but the test was modified for residential land acquisitions on or after 29 March 2018. The time frame was extended from two to five years. 

Now we are running 

It starts to get more complicated now - the test is extended from five to 10 years for acquisitions of residential land on or after 27 March 2021 (unless you had entered into an irrevocable offers, for example, as part of a tender process, to acquire before 23 March 2021). 

New builds have favourable treatment and can only be subject to a five year bright-line test.  The broad concept is that land will qualify as a New Build if it increases supply of residential accommodation.  The definition therefore points to: 

  • Land that has a self-contained residence (kitchen, bathroom etc); for which 

  • A code compliance certificate (CCC) was issued on or after 27 March 2020 (evidencing that the place was added to the land or converted). 

There are additional complications that manifest with the exceptions and how the main home exclusion applies. 

Acquisition date and timing

As above, the acquisition date will drive which bright-line time frame the residential land is subject to; it’s therefore important to understand what this is. The general position is that the date of acquisition is the date you entered into a contract (conditional or otherwise to acquire land).  This determines the bright-line time frame that you are working within. 

The next question to answer is when does the clock start ticking - the bright-line period.  Again, generally, this is the date the title is registered (settlement). 


Date of (un)conditional contract Settlement  

Don’t be mistaken into thinking the bright-line period ends 10 years following the date of the (un)conditional contract.  

The clock starts ticking on settlement, but the date of the contract drives which test applies; two, five or 10. 

A common exception to this rule is for sales “off the plan”, where the bright-line period also starts at the time of entry into a contract to acquire. The below example, helps to explain this.

woman at home office looking at paperwork


The date of disposal is driven by any agreement for the sale of the property. It’s different for certain situations, for example gifting. If the property is gifted, the disposal date is the date of the gift (ordinarily when the title is registered). There will be some dismay in understanding that gifted property could be subject to the bright-line test. “Surely not, there’s no income?” As mentioned above, it’s objective and perhaps a bit blunt in certain circumstances.


Certain “residential” land is excluded from the rules, this includes land that is: 

  • The main home; 

  • Used predominantly as business premises (generally requires a building from which the person’s business is operated from); and 

  • Farmland (worked in a farming or agricultural business and is capable of such, due to area and nature). 

The main home exclusion applies differently depending upon whether the land was acquired on or after 27 March 2021 or before.   

If on or after, the main home exclusion applies only for the period that the land is used as the main home (i.e. vacancy or applying the property for a different use can dilute the exclusion). 

If before 27 March 2021, it’s effectively an all or nothing test.  If the land was used as a main home for the majority of ownership (a 50% test), then there is full relief.  If not, then there is no relief. 

There are plenty of other nuances and intricacies within the rules: inheritance, land rich companies (and anti-avoidance), deemed occupation (for the main home exclusion, talk to your BDO adviser for the detail. 

Contact our tax team