All in Bright Line Test

Family dealing with health crisis falls victim to bright-line test

Jasmine KM
Bright Line Test, Finance News, Residential Property, Taxes

Charlotte and Andrew Spenceley do not want to sell the land they bought for a new family home, but a health crisis means they have to, and they will have to pay tax on the capital gains they make because of it.

In these situations, if the homeowner isn’t looking to profit the outcome could seem to be quite harsh.

The bright-line test, which was introduced by the National Government in 2015 but extended by the Labour Government to require properties to be held first for five years and then 10 years, was intended to tax capital gains on investment properties.

What is a ‘New Build’?

Jasmine KM
Bright Line Test

Under interest deductibility rules and extension of the bright-line test, the government has released a document which defines a New Build and which properties will be exempted from the proposed new interest limitation rules and subject to a five-year bright-line test (rather than a ten-year test)

In March 2021 the government announced its intention to limit the deductibility of interest on residential investment property.
This month, the government released a detailed document to the decisions they made regarding those tax changes.

Bright-line test - Proposed changes

Jasmine KM
Bright Line Test

Proposed extension to 10 years, excluding new builds, and changes to the treatment of times when the property is not the owner's main home.

This fact sheet summarises changes the Government intends to make to the taxation of residential property.
Once legislation is enacted, more details will be available at ird.govt.nz/property.
This fact sheet is to inform people making decisions about buying or selling property of the proposed changes and how they might affect them.