A Brighter Line

Publications > Property Articles

Watch this space: OIO Consent process to be improved
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Assistance for OIO Process
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Have you received a letter from the Public Works Act acquisition
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Kiwisaver changes help home buyers get a foot in the door
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New Information Requirements When Buying or Selling Land
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Kiwisaver Updates – 1 April 2015
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New Lending Restrictions in Force 
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Selling a Unit in a Small Body Corporate
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Kiwisaver and Your First Home Purchase
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Your Legal Property Checklist
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Real Estate Agents and REINZ Memberships
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GST On Land Transactions: Compulsory Zero-Rating
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The Status Of Land Can Impact On Its Value
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Fortune Manning Advises Manson Developments on Sale of Tower
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Amendments To The Residential Tenancies Act 1986
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Property – Try Before You Buy
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The Changing Face of Real Estate Agreements
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Buying Real Estate off Plans? What to look for!
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Courses of Action Available to Tenant Where Landlord Refuses to Grant Renewal of Lease
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Residential Tenancies – What Landlords Need to Know
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Land Information Memorandum – A Useful Tool to the Residential Property Purchaser
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Open Home Theft
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Agent’s Duty to the Vendor Might Include and Obligation to Meet the Purchaser
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Driving Daisy Crazy – Shared Access Ways
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Buying Real Estate at Auction
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Tax Traps in Subdivisions

A Brighter Line

IRD has extended the bright-line rule from two years to five years

The bright-line rule was updated on 29 March 2018 without much fanfare but with significant implications for those buying and selling residential land in New Zealand.  The changes to the bright-line rule also affect the residential land withholding tax criteria for offshore RLWT persons.

What is the Bright-Line Rule?

The bright-line rule applies to the sale or disposition of any residential land you have purchased or acquired on or after 1 October 2015:

Property purchased or acquired between 1 October 2015 and 28 March 2018. The two-year bright-line rule applies.
Property purchased or acquired on or after 29 March. The new five-year bright-line rule applies.

This means that if you sell or dispose of residential property within the bright-line rule periods above, tax will be payable on any gains from the sale or disposition of the property. Losses will be ring-fenced so that they may be used only to offset taxable gains from other land sales.

The existing exemptions to the bright-line rule continue to apply. These exemptions include the limited ‘main home’ exemption, transfers upon death in accordance with the deceased’s will or transfers as part of a relationship property agreement. The ‘main home’ exemption can be used for properties held in trust in some instances.

Residential Land

The bright-line rule applies to residential land, which means:

  1. Land that has a dwelling on it;
  2. Land for which the owner has an arrangement that relates to erecting a dwelling;
  3. Bare land that may be used for erecting a dwelling under rules in the relevant operative district plan.

Land used predominantly as business premises and land used as farmland is not included in the bright-line rule.

The start dates and end dates for the bright-line rule depend on the type of purchase/acquisition and the type of sale/disposal. Also, be aware that the bright-line test applies to all dispositions of property, including gifting and compulsory acquisition by a local authority.

Will I Be Affected?

If you are interested in further information or advice about the bright-line rule, residential land withholding tax, or if you have any concerns that your next potential sale and/or purchase, please do not hesitate to contact our friendly team.

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