Reminder to check property tax status

Customer segment leader Bernadette Newman says there may income tax to pay on the profit because of property rules that may apply, such as the bright-line test.

The bright-line property rule looks at whether the property was acquired on or after 27 March 2021 and sold within 10 years or five years for new builds, or bought between 29 March 2018 and 26 March 2021 and sold within five years.

“Generally, a property will not be taxable under the bright-line property rule if the property is the main home, is an inherited property or part of a relationship settlement,” says Newman.

There are different criteria that apply to the main home exclusion depending on when the property was acquired. To find out more, go to: ird.govt.nz/brightline-mainhome-exclusion

The sale may also not be taxable if full rollover relief applies. To find out more, go to: ird.govt.nz/ownership-transfers-and-rollover-relief

People can use the property tax decision tool on the IRD’s website to work out if they need to pay tax on the sale of their property.  

Helping complete an income tax return

If a sale is taxable, then people will need to submit an income tax return, and if it is subject to the bright-line rule then they will need to complete a Bright-line residential property sale information form – IR833. For more information, go to: ird.govt.nz/completing-your-income-tax-return-and-ir833

Inland Revenue checks residential sales that occur within the bright-line period, and people may be asked to confirm that bright-line property rule applies to their situation or inform the IRD that an exclusion applies prior to filing a tax return.