Exclusions to the bright-line test

A property will not be taxable under the bright-line test if you meet 1 of the following exclusions:

• it's your main home and your use meets certain criteria
• it’s used predominately as business premises
• it’s being used as farmland or capable of being used as farmland.

Main home

Your main home is the property where you live for most of the time. If you have more than 1 property it is the property you have the greatest connection to. You cannot have more than 1 main home.

Which property is your main home depends on:

• the amount of time you live in each home
• where your immediate family lives
• where your personal property is kept
• where your social ties are strongest
• your use of the home
• what other ties (for example: employment, business, economic) you have with the surrounding community.

Main home exclusion criteria

You can claim the main home exclusion if you:

• used more than 50% of the property’s area as your main home (including the yard, gardens, and garage)
• lived in the property as your main home for more than 50% of the bright-line period.

If either one of these is less than 50%, then the main home exclusion does not apply, and you will need to pay tax on any profit when you sell it.

For example, if you use 40% of a property as your main home and rent out 60% as a flat, you cannot use the main home exclusion when you sell that property.

For properties sold before 1 July 2024, different criteria apply depending on when you acquired the property.

Property sold before 1 July 2024

You must have lived in the property as your main home

It's important to note that having the intention to use the property as your main home is not enough, you must have actually used it for this purpose.

The exclusion will also not apply when only a family member and not the owner has used the property as their main home.

The property does not need to have been used without interruption. For example, a main home can be rented out for short periods while you are on holiday or before settlement of the sale of the property, as long as the total time it is used as your main home is more than the total time it is not used as your main home.

Construction period

When you build a new home, you can ignore the construction period when determining if your usage of the property qualifies for the main home exclusion.

Only look at your usage before construction began, and from when construction was completed to when the property is sold.

Construction is the work to build the home and includes the design phase. Construction is usually considered complete when the code compliance certificate is issued under the Building Act 2004.