Bright-line test on house sales extended to five years
The bright-line test on residential property sales will be extended from two to five years, the government has confirmed today (15 February 2018). It means profits from residential investment properties which are bought and sold within five years could be taxed.
The 5-year period will only apply to residential investment properties where the date that the person acquires an estate or interest in the residential property is on or after the date on which the bill received the Royal Assent, which is expected in March 2018.
Clients have a small window between now and the date of Royal assent to enter into sale and purchase agreements for the purchase of land for that land to be subject to the 2 year bright-line period rather than the extended 5 years.
Current exemptions from the bright line test will remain, this includes the exemption for the main home of owner-occupiers of residential property.
The change will be made by adding an amendment to legislation currently making its way through Parliament.
We remind clients that the bright-line rules are complex and unforgiving. There have been recent examples where clients are taxed under these rules. Please contact us on 09 426 8488 to discuss your current or future property investments purchases so we can advise you on bright-line tax planning.
This material has been prepared for information purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your normal source of expert advice before acting on anything or contact ABA Chartered Accountants if we can assist you in any way.