Lately, a common discussion with owners has centered around selling a property to position themselves more comfortably regarding debt. There are many considerations that should be made before a final decision to ensure that your best interests are looked after.
One of these considerations is the bright line rule.
What is the bright line rule?
The bright-line rule looks to whether a person who sells a residential property must pay tax on the profit they make from the sale. This rule came into effect 1st October 2015 and has had subsequent updates since. There are exemptions which include the likes of:
– It’s your main home and your use meets certain criteria
– You have inherited the property, or
– The property was transferred on the death of a person to the executor or administrator of the estate.
The bright line test has become far more complicated in recent years. It is best that I direct you to thorough information put together on the IRD website. The premise of me writing this was to alert/remind you of the bright line rule/test to avoid getting caught out when liquidating one of your biggest assets.
A couple of great links to more info include – https://taxpolicy.ird.govt.nz/publications/2021/2021-other-fact-sheet-bright-line-test/fact-sheet – which includes a simple flow chart and – https://www.ird.govt.nz/updates/news-folder/changes-to-the-bright-line-property-rules – which covers changes to the bright line property rules. For a general summary that includes a great PDF at the bottom click here.
For further clarification on any matters I suggest you talk to your trusted solicitor or accountant.
