Accounting and Tax

Yet another change to the bright-line tax rules?

Ryan Watt
26 October 2023
3 min read

Now that we are post-election, if National can form the next coalition to govern New Zealand, there may be several tax changes on the way. In particular, based on National’s policies leading up to the election, it looks like bright-line tax rules are in for another modification.

Initially introduced by National in 2015, the bright-line tax was designed to capture property speculators who buy and sell property within a short timeframe for capital gain rather than for long-term investment or personal use. Initially, the bright-line period was two years. Then the Labour Government increased it to 5 years and then subsequently ten years.

This increase to 10 years caused many unintended consequences, causing a number of exemptions and the introduction of roll-over relief measures for situations that were caught by bright-line tax but were not intended to, for example, the transfer of a holiday home to a family trust.

The question is now whether all of this was worth the effort.

Based on National’s pre-election policies, the bright-line period could be rolled back to 2 years (coalition partners may have some input), making it as early as July 2024. This means that any property acquired before July 2022 may no longer be caught by the bright-line tax rules. However, there is obviously no detail supporting this yet, let alone any legislation being introduced, so time will tell whether the bright-line period gets reduced to 2 years, and from when.

This raises a few further questions:

Will roll-over relief rules remain?

Personally, I would like to see these remain, as they allow for more flexibility when restructuring asset holding without triggering any unintended tax costs.

What about the new build rules?

These are unlikely to be necessary going forward as the period reduces to 2 years.

Will the main home exclusion remain the same?

The updated main home exclusion should still be fit for purpose and provide some flexibility, especially around building a home.

What now?

Overall, the bright-line tax rules look to be in for another shake-up in this National-led government. Expect more detail in the next six months about the changes, and unless you need to make a property transaction now, it could be worthwhile waiting to see what the detail shows.

To find out more and go deeper into the implications on property matters following the New Zealand election, watch our webinar here.

Contact us at Findex to talk with our Tax Advisor's directly for advice on your specific circumstances.


The views and opinions expressed in this article are those of the author/s and do not necessarily reflect the thought or position of Findex.

October 2023

Author: Ryan Watt | Partner

Ryan is committed to helping clients make wise decisions about their business and taxation needs. He is driven to provide tailored and timely advice that cuts through the complexity and provides a commercial and practical outcome. Before joining Findex, Ryan was in the transaction services team of a leading Big 4 firm, advising clients on the tax implications of large transactions. Ryan’s clients range from individuals and trusts to privately owned New Zealand companies and multi-national groups, to whom he provides a broad spectrum general tax matters, property tax, international tax, M&A/transaction services and trans-Tasman tax.