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Key takeaways
- ✓Properties acquired from 1 July 2024 have a 2-year bright-line period
- ✓Sell within 2 years of acquisition and the gain is taxed as ordinary income
- ✓The main home (primary residence) is generally exempt
- ✓The bright-line period has changed three times — future changes are possible
- ✓Gains are taxed at your marginal income tax rate — potentially 39% for high earners
How the bright-line test works
The bright-line test taxes gains on certain residential property sales as income (NZ doesn't have a general capital gains tax).
For properties acquired from 1 July 2024: The bright-line period is 2 years. If you buy a property on 1 August 2024 and sell on 1 September 2025 (13 months later), any profit is taxable. Sell on 1 September 2026 (25 months later) and no bright-line tax applies.
The taxable gain = Sale price minus acquisition cost minus selling costs minus deductible expenses. This gain is added to your other income and taxed at your marginal income tax rate — potentially 39% for high earners.
💡 Tip: The bright-line test is applied based on the title transfer date, not the date you signed the agreement. Know your exact title date.
History of bright-line changes and future risk
The bright-line period has changed multiple times:
2015: Introduced at 2 years. 2018: Extended to 5 years. 2021: Extended to 10 years. 2024: Reduced back to 2 years for all residential property.
Three consecutive governments have changed this rule. The current 2-year period could be extended again by a future government.
For long-term buy-and-hold investors (5+ years), current rules present limited risk. For active investors who buy, renovate, and sell within 2–5 years, future rule changes are a meaningful risk to consider.
Exemptions and special cases
Main home exemption: The family home (your primary residence) is generally exempt from the bright-line test. However, if you have more than one home, only one can be your "main home" at a time.
Inherited properties: Properties inherited from a deceased estate are generally not subject to the bright-line test.
Relationship property: Transfers of property as part of a relationship property settlement are also generally exempt.
New builds: Properties acquired under certain new build conditions had a different 10-year bright-line period under the previous rules. Under the current 2-year rules, all properties acquired from 1 July 2024 are treated the same.
Always consult a tax adviser or Inland Revenue for your specific situation — the rules have nuances that affect different ownership structures differently.
Frequently Asked Questions
Calculators mentioned in this guide
Disclaimer: Calculations are estimates for general guidance only and do not constitute financial advice. Mortgage rates, LVR restrictions, and lending criteria vary by lender and may be subject to RBNZ requirements. Consult a registered financial adviser before making property decisions.