Changes to Brightline
As announced by the New Zealand Government, the Bright-line Rule will revert to its original form, being the 2-year test
If you sell a property on or after 1 July 2024 the bright-line property rule will only apply if the property is sold within 2 years of purchasing it, rather than the outgoing 5- or 10-year periods.
It is important to note that the bright-line date is not the date on which settlement occurs but will usually be the date when the vendor enters into an agreement for sale and purchase. For example, if an agreement is entered into on 5 June 2024 with settlement after 1 July 2024, it will still be subject to the existing bright-line rules, not the new 2-year test.
Main Home
Generally, the bright-line property rule does not apply to the sale of your main home, and this will not change. However, the criteria for the main home exclusion will be as follows:
You must:
- use more than 50% of the property’s area as your main home.
- use the property as your main home for more than 50% of the time you owned it.
If you have built on the land, the construction period will not be included when determining the usage qualifiers under the main home exclusion.
Rollover Rules
Under the bright-line rules, there are special rollover relief rules that apply for certain transfers of residential property to and from family trusts where the bright-line tax does not apply. Previously this relief was very limited and complex.
The rollover relief rules will be extended to apply to “associated persons transfers”. This will mean that transfers that were previously subject to the same bright-line treatment as a third-party, will now include to transfers:
- between associated companies, or between a person and an associated company;
- between relatives (within 2 degrees of relationship);
- between trusts and settlors, beneficiaries, and related trusts;
- between a partner or a partnership; or
- between a look-through company and an owner of that company.
This new relief will be limited to situations where the transferor and the transferee are associated for 2 years before the transfer and you will only be able to claim rollover relief once in any 2-year period.
Want to know more?
If you have any questions about these matters please contact our specialist property team.
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