The bright-line test

If you sell a residential property any profit will be taxable if it is sold within a set period of time, the bright-line period, unless an exclusion or rollover relief applies.

This also applies to New Zealand tax residents who buy and sell overseas residential properties. 

Go to the ‘Property tax decision tool’ at the bottom of this page to work out if the property you are selling is taxable under any of the property rules, including the bright-line test.

Bright-line period

The bright-line period begins with the bright-line start date and ends with the bright-line end date.

For property sold on or after 1 July 2024, the bright-line test looks at whether your bright-line end date for the property is within 2 years of your bright-line start date.

For property sold before 1 July 2024, different timeframes apply.

Bright-line start and end dates

For a standard purchase of property, the bright-line period starts from the date the property’s title is transferred to you (generally the settlement date).

For a standard sale, the bright-line period ends when you enter into a binding sale and purchase agreement to sell the property.

Different rules apply for other types of purchase (for example off the plan) and for other types of sale or disposal (for example when property is gifted).

Selling residential property after the bright-line period ends

The bright-line test does not apply if you sell a property outside the bright-line period. But other property sale rules will still apply when you:

• buy property with an intention to sell it
• have a pattern of buying and selling or building and selling your main home
• or a person you’re associated with is in the business of property dealing, developing or building and the property was bought for the business.

Situations where the bright-line test does not apply

Generally, the bright-line test does not apply to a sale of property that has been your main home when your use meets certain criteria. Business premises and farmland are also excluded. 

Full or partial rollover relief is available for certain types of ownership transfers. 

The bright-line test does not apply if you’re the executor or administrator of a deceased estate or you inherited the property.

Inheriting property

Property affected by a North Island adverse weather event and sold to a Crown or local authority is not taxable under the bright-line test.

January and February 2023 weather events

Residential land withholding tax (RLWT)

If you're an offshore RLWT person and have a sale subject to the bright-line test, a withholding tax will be deducted at the time of the sale unless a valid certificate of exemption is held.

The residential land withholding tax (RLWT) should be deducted at the time of sale by your conveyancer.

Residential land withholding tax (RLWT)

Bright-line residential property sale information form - IR833

Complete this if you had a bright-line property sale during the year and show the income from the sale in your income tax return.