We hope the holiday season and the long weekends have been good to everyone. It feels like it is time to start the working year and get serious about these plans that have been dreamt up over the summer.
One of the hot topics right now is the property market so I have decided to talk about the Bright Line Property Rule that relates to the buying and selling of property, so you are all much more informed if you embark on this journey.
What is the bright-line property rule?
The bright-line property rule means that people who sell a residential property might need to pay income tax on any gains.
If you sell a residential property you have owned for less than 5 years you may have to pay income tax. This rule also applies to New Zealand tax residents who buy overseas residential properties.
How it works depends on when you bought the property.
- If you purchased the property before 1 October 2015, the bright-line property rule does not apply.
- If you purchased the property between 1 October 2015 and 28 March 2018, the bright-line property rule may apply if you sell it within two years of buying.
- If you purchased the property on or after 29 March 2018, the bright-line property rule may apply if you sell it within five years of buying.
Generally, the bright-line period starts on the date the property's title is registered with Land Information New Zealand (LINZ) and ends when you enter into a Sale and Purchase agreement.
If the property is in another country, the bright-line period starts on the date the transfer was registered under that country’s laws.
There are three exclusions:
- if it's your family/main home
- if you inherited the property
- if you're the executor or administrator of a deceased estate
The bright-line rule does not replace existing property tax rules. You might still need to pay tax on your property profits even if the bright-line rule does not apply.
If you are needing any help with this please don’t hesitate to contact us @ Altitude Advisors Ltd.