Bright-Line Test
The bright-line test taxes profits from selling residential property if the property was acquired and sold within a specified period. The bright-line period depends on when you acquired the property: 2 years for property acquired on or after 1 July 2024, 10 years for property acquired between 27 March 2021 and 30 June 2024, and 5 years for property acquired before 27 March 2021.
The test applies to the profit (sale price minus purchase price and allowable costs). This profit is taxed as ordinary income at your marginal tax rate — it is not a separate capital gains tax. The main home exemption generally applies if the property was your primary residence for the majority of the ownership period.
Other exemptions include inherited property, property transferred under a relationship property agreement, and certain new builds (which had a reduced bright-line period under earlier rules). If you're selling an investment property, it's essential to check whether the bright-line test applies before completing the sale.
Related Terms
Income Tax
New Zealand income tax is calculated using a progressive bracket system.
IRD
Inland Revenue Department (IRD), commonly known as Inland Revenue or simply IRD, is the New Zealand government agency responsible for collecting taxes, distributing social support payments, and enforcing tax compliance.
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