Investment property changes

When: 27 March 2021

What: For properties acquired on or after 27 March 2021:

  • Legislation has passed that extends the bright-line test from five years to 10 years on residential property.
  • The Government intends for the bright-line test to remain at five years for new builds. The Government has introduced legislation that is currently being considered by the Finance and Expenditure Committee in Parliament.
  • Legislation has passed that introduced a ‘change of use’ rule. If the sale of your property is subject to the bright-line test, and you don’t use the property as your main home for 12 months or more, you will be required to pay income tax on a proportion of the profit made through the property increasing in value.
  • If you sell a property within 10 years of acquiring it (or five years for a new build) and it was your main home for the entire time you owned it, you will not pay tax under the bright-line test on any gain in value.
  • Any gain in property value that is considered taxable income (including under any of the bright-line tests) will also affect any other obligations or entitlements you have based on taxable income, such as student loan repayments, child support payments, and Working for Families.

For properties acquired before 27 March 2021:

  • The previous bright-line test for five years will continue to apply for properties acquired before 27 March 2021.
  • The Government has proposed that interest on loans for investment properties acquired before 27 March 2021 can still be claimed as an expense, but the amount will reduce each year until it’s completely phased out by the 2025-2026 tax year. Legislation is currently being considered by the Finance Expenditure Committee in Parliament.

Source: Business.govt.nz