Most property investors in New Zealand will be aware that the Brightline Test for Residential Land dictates that gains from the disposal of residential land acquired and disposed of within five years will be taxable, subject to some exceptions. Pretty straight-forward, right? Well, like most tax legislation, there are areas that can catch taxpayers out.
The test generally starts when title for the property transfers and ends when a contract is entered into to sell the property. For “off the plans” sales however, the two-year period starts when the person signs a contract to purchase the property and ends when they sign a contract to sell the property.
If the time between the date a taxpayer enters into a contract to purchase land “off the plans” and the time they enter into a contract to sell the land is less than five years, any gains will be subject to the bright-line test.
If you are considering selling your investment property that you purchased off the plans and are unsure if the sale will fall within the brightline period, please contact your Hayes Knight advisor.