Bright Line Test Passes Second Reading

November 4, 2015 New Zealand Taxation

The newly proposed “bright line test” for gains on property sales in new Zealand has taken another step to becoming a reality.

On November 3rd the second reading the Taxation (Bright-line Test for Residential Land) Bill passed its second reading in Parliament.

The rules detailed in the new Bill are aimed at ensuring that gains made from the sale of property are properly taxed, by proposing that any property sold within two years of its original purchase are subject to income tax at top marginal rate of the seller.

The rules would not apply to the sale of the primary home of the seller, or in certain predetermined cases, such as inheritance or for properties obtained through divorce.

Currently the sale of homes by property speculators and investors may escape tax liability, as regulations are based on “intent” and whether the seller “intended” to make a profit from the sale.

If the Bill passes its third reading and attains Royal Ascent, then the new rules will apply to the sale of all properties acquired after October 1st 2015.

Photo By: James Buck