Changes to the Bright-Line Property Rule

The bright-line property rule came into effect on the 31^st October 2015 when the Taxation (Bright-line Test for Residential Land) Act 2015 was enacted by Parliament.

The rule provides that if you buy a property and then sell that same property within a certain timeframe, then you must pay income tax on any profit you make.

There have been several changes to the timeframe since the rule was brought in.

The changes were as follows:

• (a) Any properties purchased between 31^st October 2015 and 28^th March 2018 were subject to the 2-year rule
• (b) Any properties purchased between 29^th March 2018 and 26^th March 2021 were subject to the 5-year rule; and
• (c) Any properties purchased after 27^th March 2021, were subject to the 10-year rule.

What is changing?

From the 1^st July 2024 the timeframe is being reduced back down to 2 years.

The reduction in the timeframe is being applied to all properties. So, if you are currently subject to the 10-year timeframe (as you say brought in March 2023), then from the 1^st July 2024 you will now be subject to the 2 year timeframe.

However, this will only apply if you sell the property after 1^st July 2024. In relation to the bright-line property rule, selling your property means when you entered into a sale and purchase agreement. So, if you sign an agreement to sell prior to the 1^st July 2024, then the current timeframes set out above apply.

For some people whether they sign an agreement for sale before or after the 1^st July 2024 will be very important as it could determine whether or not they incur a tax bill or not.

If you are looking to sell soon, we would always recommend checking with your lawyer or accountant as to whether or not you are selling within the bright-line period before signing any agreements.