What is the bright line test when selling?

The two year period

The property is taxed under the test if the bright line end date falls within two years of the bright line start date. Those dates are defined by Inland Revenue and depend on how the property was acquired, so your accountant or lawyer should confirm the exact dates that apply to you rather than counting from memory.

The two year period replaced the earlier five year and ten year periods. Those longer periods still govern property sold before 1 July 2024, so an older sale is not read against today's rule.

The main home exclusion

Where the property was your main home, the exclusion can take the sale outside the test. Both of these have to be met.

• More than 50% of the property's area was used as your main home, which includes the yard, the gardens and the garage.
• It was lived in as your main home for more than 50% of the bright line period.

You cannot have more than one main home. Where a person has two properties, only one of them can qualify.

When the exclusion does not apply

The main home exclusion is not available if you have a regular pattern of buying and selling, or of building and selling, your main home. It is also unavailable if you have already used the exclusion twice in the preceding two years.

This is the part that catches people who move often, or who renovate and move on repeatedly. Living in a property is not by itself enough if the pattern is there.

What sits outside the test entirely

Property used predominantly as business premises, and farmland, are outside the bright line test. Other tax rules can still apply to those sales.

How to handle it

Before you list, work out the date you acquired the property, the date the test would treat as the end date, and how the property has been used over that time. If the sale is anywhere near the two years, get that checked before you sign anything, because the tax is calculated on the profit and can be a large number.

This page is general information. An accountant should confirm the position on your own facts before you rely on it.