Last Thursday, 15 February 2018, Revenue Minister Stuart Nash confirmed the bright-line test on residential property sales will be extended from two years to five years in legislation currently making its way through Parliament.
The changes to extend the bright-line test are intended to dampen property speculation and make homes more affordable. The extension means that profits from residential investment properties which are bought and sold within five years will generally be taxable.
Current exemptions from the bright line test will remain. This includes the exemption for the main home of owner-occupiers of residential property.
The extension to the bright-line test will apply to residential investment properties purchased from the date on which the bill receives the Royal Assent, which is expected in March. The passage of the bill will also enable the Tax Working Group to factor the change into any consideration of a comprehensive capital gains tax.
The bright-line test rules are complex. If you have any immediate questions about the potential impacts of these changes, please get in touch with your Monteck Carter account manager.
For more information on the Bill,visit the IRD website.