The bright-line test can tax the profit when you sell residential property within a set time of buying it. For sales from 1 July 2024 the period is 2 years. Here is how it works in plain English.
How the 2-year bright-line period works
Start: for a standard purchase, the period starts when the title transfers to you - usually the settlement date.
End: for a standard sale, it ends when you sign a binding sale and purchase agreement.
If those dates are within 2 years of each other, the profit may be taxable. Off-the-plan purchases and gifts have different rules.
The main home exclusion
The bright-line test generally does not apply to your main home - the place where you live most of the time. Inland Revenue applies two tests, and you must meet both:
Area: more than half of the property (including yard, garden and garage) is used as your main home.
Time: you lived there as your main home for more than half of the bright-line period.
Intending to live there is not enough - you must actually live there. Short rentals while you are on holiday are allowed. The exclusion does not apply if you have a regular pattern of buying and selling (or building and selling) your home, or if you have already used it twice in the 2 years before the sale. Homes held in a trust can qualify only in limited cases.
Other exclusions
Property used mainly as business premises
Farmland
Rollover relief for some ownership transfers - for sales from 1 July 2024 this extends to transfers between associated persons
Bright-line is not the only rule
Even outside the 2-year period, a sale can be taxable if you bought the property intending to sell it, if you are in a property business, or if you subdivided or developed the land. That is why it is worth checking before you sell.
Property sold before 1 July 2024
Different periods applied (5 or 10 years, depending on when you bought), with different main home rules. If an older sale is in question, ask us.
Need help? Yugraj CA is a Chartered Accountant (CA) firm helping property owners across New Zealand, fully online. Call 021 0234 6659, email ysm@yugrajca.co.nz, or see our property accounting services.
Disclaimer: This article is general information only, based on Inland Revenue guidance as at October 2026. It is not tax, legal or financial advice for your situation, and tax rules can change. Please talk to us, or another qualified adviser, before acting. Yugraj Singh Mahil Chartered Accountants Limited does not provide financial, investment or mortgage advice. Last reviewed: October 2026.
