Guide
The bright-line test when you sell: the current 2-year rule
Updated
The bright-line period has changed more than once. If you are relying on a figure you remember, check it: for sales from 1 July 2024 the period is two years.
The current rule
Inland Revenue states it directly: "For property sold on or after 1 July 2024, the bright-line test looks at whether your bright-line end date for the property is within 2 years of your bright-line start date." If you sell inside that period, "any profit will be taxable unless an exclusion or rollover relief applies" (Inland Revenue). For property sold before 1 July 2024, different and longer timeframes apply, so an older sale is a different question.
When the clock starts and stops
- Start date
- "For a standard purchase of property, the bright-line period starts from the date the property's title is transferred to you (generally the settlement date)."
- End date
- "For a standard sale, the bright-line period ends when you enter into a binding sale and purchase agreement to sell the property." Not settlement: the day you sign.
- Other cases
- Different rules apply for other types of purchase, such as buying off the plan, and for gifts and other disposals.
When it does not apply
- Your main home, generally, "when your use meets certain criteria".
- Business premises and farmland are excluded.
- Inherited property: the test does not apply if you inherited it or you are the executor or administrator of a deceased estate.
- Rollover relief is available in full or in part for certain ownership transfers.
- North Island adverse weather event property sold to the Crown or a local authority is not taxable under the test.
Selling outside the bright-line period does not automatically make a sale tax free. Inland Revenue lists other property rules that still apply, including buying with an intention to sell, a pattern of buying and selling or building and selling your main home, and being associated with a property dealer, developer or builder.
What your conveyancer does
Two things sit in the conveyancing file. First, the tax statement: the Law Society's buying and selling guidance notes that on sale you sign the authority to transfer title "and also a tax statement for IRD" (Law Society). Second, residential land withholding tax: Inland Revenue states that if you are an offshore RLWT person with a sale subject to the bright-line test, "a withholding tax will be deducted at the time of the sale unless a valid certificate of exemption is held", and that "the residential land withholding tax (RLWT) should be deducted at the time of sale by your conveyancer".
This is a summary of Inland Revenue's published position on the updated date above, not tax advice. If a sale might be inside the bright-line period, use Inland Revenue's property tax decision tool and talk to your lawyer or accountant before you sign.