Bright-line Property Tax

Limited scope quasi capital gains tax introduced by the National Government in 2015.It has since been expanded by subsequent governments and now applies to property purchases and sales within 10 years commencing 27 March 2021. 

This date specific capital gains tax applies to residential property which is not your main home. The tax also applies to bare land where a residential property may be constructed and property which might not derive income such as a second holiday home. The tax does not apply to commercial property. 

Taxable consideration dates are: 

• Property acquired between 1 October 2015 and 28 March 2018 and sold within 2 years
• Property acquired between 29 March 2018 and 26 March 2021 and sold within 5 years
• Property acquired from 27 March 2021 and sold within 10 years. 

There are a number of exclusions, such as from 27 March 2021 sold within 5 years for new builds. Various legal definitions for when a property is acquired and sold. Also rules to follow to determine what is your main home. Further, the National Party have undertaken to remove the 10-year extension should they form the next government. 

The amount of tax payable is calculated by working out the capital gain on a property sale and applying the gain to your marginal rate of taxation. Capital gain is calculated by net sales proceeds less cost basis. 

Currently, taxable income above $70,000 pa is taxed at 33% and then 39% above $180,000 pa. As property transactions can be profitable it will be easy to start at the 33% rate and move into the 39% rate for any taxable capital gain. 

In summary, the Brightline tax is a wide-ranging tax which is subject to arbitrary change and strict legal definitions. If you get it wrong it can be a very expensive mistake. If you have any concerns or questions please get in contact. 

Further assistance please feel free to contact us.

The information contained within this website is provided for informational purposes only and is not intended to substitute for obtaining accounting, tax, or financial advice from a professional accountant.