Changes to the Brightline test to come into effect on 1 July 2024

The Brightline test is a way of assessing whether tax is payable on any profit made on the sale of a residential property in New Zealand.

Changes have been announced to the brightline test which are to come into effect on 1 July this year, as a result of the change of government.

The Brightline test for residential property will be reduced from ten years to two years, which was the period set when Brightline was first introduced.

Properties sold after 1 July 2024 will therefore only have to pay tax on any profit made on sale if they have been owned for less than two years, unless an exception applies. 

Exceptions for main homes, separation/relationship property transfers, some transfers to trusts, and receiving a property via an estate will remain in place.

Currently, properties purchased between 29 March 2018 and 27 March 2021 have a brightline period of five years, and properties purchased after 27 March 2021 have a brightline period of ten years. New build homes have a brightline period of five years.

The new brightline test will apply to all properties so properties with a five or ten year Brightline period will be reduced to two years.

Properties purchased before July 2022 will no longer be subject to the Brightline test because as at July 2024 all sales of those properties will have occurred after at least two years.

It pays to take legal and tax advice before selling a property to make sure you are aware of your obligations relating to brightline.

Leading law firms committed to helping clients cost-effectively will have a range of fixed-price Initial Consultations to suit most people’s needs in quickly learning what their options are.  At Rainey Collins we have an experienced team who can answer your questions and put you on the right track.

Andie Donnelly and Hanifa Kodirova