NICK COWDY / Residential Sales Consultant, Principal Agent

Starting from 1 July 2024, New Zealand’s bright-line rule for property sales is changing. Previously, if you bought and sold a property within 5 years (for purchases made between 29 March 2018 and 26 March 2021) or within 10 years (for purchases made on or after 27 March 2021), you might have to pay tax on the profit. The new rule shortens this period to just 2 years for any property bought and then sold.

This change aims to make tax rules simpler for property owners. The original 2-year bright-line test, introduced in 2015, was designed to target those buying and selling properties quickly for profit. Over time, the government extended this period, trying to cool down the housing market and reduce speculation. However, these extensions made the tax rules more complicated, leading to this decision to return to a simpler 2-year rule.

What does this mean for property owners?

With the rule going back to 2 years, buying and selling property becomes less tangled in tax worries for most people. If you sell a property more than 2 years after buying it, this tax rule won’t apply, with some exceptions still in place (like for your main home or inheritance cases).

This is part of a larger bill that also brings back the ability to deduct interest for residential investment properties and makes changes to depreciation deductions for buildings. The government’s move to simplify these rules follows its promise to make tax obligations clearer for property investors and owners.

Key Points to Remember –

Rule Change Date: The new 2-year period starts on 1 July 2024. This applies to any residential property sold within 2 years of purchase, with exceptions.

Exceptions: The exceptions include your main home, inherited properties, and a few other specific situations.

Why It Matters: This change simplifies tax rules for most property owners and could affect your decisions if you’re planning to buy or sell property soon.

If you’re involved in buying or selling property in New Zealand, it’s essential to understand how these changes might affect you. The rules are simpler, but you still need to be aware of the specifics, especially if you’re close to the 2-year mark. Staying informed and consulting with tax professionals could be wise as these changes roll out and further details are clarified by the government.