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.