“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.”