What is the NZ Bright-Line Test?

What is the bright-line test?

New Zealand has no general capital gains tax, but the bright-line test is its closest equivalent for residential property: if you sell within a set window of buying, the gain is taxed in full as ordinary income, at your marginal rate — no discount, unlike Australia’s CGT discount.

The current rule (since 1 July 2024)

Since 1 July 2024, IRD applies a single, uniform 2-year window, measured from your purchase (settlement) date to your sale date — regardless of when you originally bought the property. This replaced a more complicated tiered system (2, 5, then 10 years, depending on purchase date) that applied before.

Sold within 2 years of purchase → gain taxed in full
Sold 2+ years after purchase → not caught by this rule

The trigger is the sale date, not the purchase date — a property bought in 2022 under the old 10-year rule is only caught today if you sell it within 2 years of that 2022 purchase, not because 10 years hasn’t elapsed yet.

Key exemptions

• Main home exemption — if the property was genuinely your main home for the relevant period, the gain may be exempt.
• Inherited property — property acquired through inheritance has its own exemption.

Where you’ll see it

Property → Tax tab — for a property with a real recorded sale, or via the Sale Scenario what-if panel for a hypothetical future sale. Both use the same underlying calculation.

A note on historical sales

Sales that happened before 1 July 2024 fall under whichever tiered rule was in force at the time (2, 5, or 10 years depending on purchase date) — Property Insights doesn’t model those older tiers, since any live or future scenario in the app is evaluated under the current uniform 2-year rule. If you’re reviewing a historical sale from before mid-2024, check with a tax advisor for the rule that actually applied then.

This is general information, not tax advice — confirm your situation with IRD or a qualified tax advisor.