Thinking about selling a residential property? Don't forget about bright-line property rules.

Tuesday, 16 May 2023

If you’re thinking about selling a residential property, make sure you know what your tax obligations will be as you may have to pay income tax on the profit. There are different property rules that may apply, such as the bright-line property rule.

The bright-line property rule looks at whether the property was acquired:

• on or after 27 March 2021 and sold within 10 years or 5 years for new builds 
• between 29 March 2018 and 26 March 2021 and sold within 5 years.

Generally, a property will not be taxable under the bright-line property rule if the property has been your main home, is an inherited property or part of a relationship settlement.

There are different criteria that apply to the main home exclusion depending on when the property was acquired. To find out more, go to: ird.govt.nz/brightline-mainhome-exclusion

The sale may also not be taxable if full rollover relief applies. To find out more, go to: ird.govt.nz/ownership-transfers-and-rollover-relief

You can use the property tax decision tool on our website to work out if you need to pay tax on the sale of your property.  For more information on the bright-line property rule, the exclusions and rollover relief, go to ird.govt.nz/property-tax

Helping you complete your income tax return

If a sale is taxable, then you'll need to submit an income tax return, and if it is subject to the bright-line rule then you will need to complete a Bright-line residential property sale information form – IR833. For more information, go to our website: ird.govt.nz/completing-your-income-tax-return-and-ir833

Inland Revenue checks residential sales that occur within the bright-line period, and you may be asked to confirm that bright-line property rule applies to your situation or inform us that an exclusion applies prior to filing your tax return.