Hon Todd McClay
Minister of Revenue
1 October 2015
Gains on property sales targeted from today
Revenue Minister Todd McClay says the new bright-line test, which comes into force today, will improve compliance with
the current residential land sale rules and help to ensure that people pay their fair share of tax on gains from
property sales.
“Any gains made on residential property purchased and sold within two years, will be subject to income tax, with some
exceptions. The exceptions include the sale of an owner’s main home, inherited property, or the transfer of property in
a relationship settlement.
“It will supplement the current “intention” test in the Income Tax Act 2007, which can be difficult to enforce.
“The bright-line test makes it clear that all property buyers, including overseas buyers, who buy and sell a residential
property within two years, will be taxed on their gains,” says Mr McClay.
The proposed new test will only apply to the sale of “residential land” – it does not apply to land predominantly used
as business premises or farmland.
“The bright-line test defines the start and end of the two-year period as beginning when a person obtains registered
title for the property, and ending when the person enters into an agreement to sell the property.
There are also rules around ‘buying off the plan’.
“The bright-line test is about fairness and clarity. With few exceptions, if you are selling anything other than your
family home for a fast gain, you will now pay the tax you owe.”
ENDS