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:
What test applies – two year, five year or 10 year
When the clock starts ticking;
When the clock stops; and
Are there any exclusions that might apply?
This fact sheet will provide a broad overview of each of the above.