Bright Line Calculator

The 2 Year Bright Line Test

The bright line test is an Inland Revenue rule that can tax the profit on a residential sale. For a disposal on or after 1 July 2024, section CB 6A of the Income Tax Act 2007 treats the profit as income when the bright line end date is within 2 years of the bright line start date, and no exclusion or rollover applies. Your intention in buying or selling is not relevant to this test. Other land sale rules can still tax a sale, including where the land was bought with a firm intention to sell, where there is a pattern of buying and selling or building and selling, or where you or an associate are in the business of dealing, developing, or building and the property was bought for that business.

Inland Revenue sets the current rule out in Bright line property tax, IR1229 (March 2026) and on its bright line test page. Residential property includes land with a house, land you have an arrangement to build a house on, and land you can build a house on under the district plan. A bare section can still be residential land. Robert, in IR1229, buys a section zoned for residential purposes in June 2024 and sells it in August 2025. Inland Revenue says the bright line test applies even though there is no house on the land. The test also applies to a New Zealand tax resident who buys and sells residential property overseas. A sale with an end date before 1 July 2024 is not calculated here.

Income tax on the profit is separate from GST on the transaction. A private residential sale often has no GST, while the bright line test can still apply. GST on a property sale uses a different statute.

Start Date and End Date

For a standard purchase, Inland Revenue starts the bright line period on the date Land Information New Zealand registers the transfer to you under the Land Transfer Act 2017. That is usually the settlement date, not the day you signed the agreement to buy. For a standard sale, the period ends on the day you enter a binding sale and purchase agreement, even if finance or a building report is still outstanding. The later registration of the sale with Land Information New Zealand is not the end date. If more than one kind of disposal applies, use the earliest end date. Inland Revenue lists the dates on its start and end dates page, and in QB 25/11.

Marie, in IR1229, signs an agreement to buy on 19 March 2023. Land Information New Zealand registers the transfer on 17 May 2023. She signs an agreement to sell on 26 July 2024, and the sale transfer is registered on 31 August 2024. Inland Revenue uses 17 May 2023 as the start date and 26 July 2024 as the end date. The purchase agreement and the sale registration are not the dates that count.

Situation	Date Inland Revenue uses
Standard purchase	Date the title is registered to you, usually settlement
Standard sale	Date you enter the sale and purchase agreement
Off the plans	Date you entered the agreement to buy, not the later registration
Land you subdivide	Original registration date of the undivided land
Gift	Date the gift is made, generally when the interest is registered to the new owner
Mortgagee sale	Date the property is disposed of for the mortgagee, usually settlement
Compulsory acquisition	Date of the acquisition by the Crown, a local authority, or a public authority
Lease with a perpetual right of renewal, later freehold	Date the leasehold estate was first granted
No registration before the end date	Date you acquired an interest in the property

Denise, in IR1229, enters a contract to buy off the plans on 2 July 2023. Title is registered on 1 September 2023. She enters a contract to sell on 1 September 2024. The start date is 2 July 2023, the contract date, and Inland Revenue says the end date is within 2 years, so any profit is taxable. A subdivision keeps the original title date. A subdivision of a family section can also raise a separate GST question. That GST test is not this calculator.

The Day the 2 Years End

Inland Revenue's co ownership example in IR1229 treats a 50% share registered on 31 July 2023 as taxable if it is sold before 31 July 2025. The same calendar day two years later is the first day outside the test. This calculator uses that reading. An end date on 30 July 2025 is inside. An end date on 31 July 2025 is outside. The second 50% share in that example, acquired on 31 August 2024, is taxable if sold before 31 August 2026.

Marie's end date of 26 July 2024 falls before 17 May 2025, the same calendar day two years after her start date of 17 May 2023, so those dates are inside 2 years. Helen gifts land with a start date of 1 May 2025 and registers the transfer to Ian on 1 February 2027. IR1229 says that gift is within 2 years. Gifts of land are treated as transferred at market value. Helen's example uses a $400,000 cost and a $450,000 market value, and $50,000 is taxable. If the start date is 29 February, the next year two years later has no matching day. This calculator treats 1 March as the first day outside, so 28 February is still inside.

The Main Home Exclusion

Inland Revenue lets you claim the main home exclusion, for a sale on or after 1 July 2024, only when both tests are met. You used more than 50% of the property's area as your main home, including the yard, gardens, and garage, and you lived in it as your main home for more than 50% of the bright line period. If either figure is 50% or less, the exclusion does not apply and tax is due on any profit. Meaning to live there is not enough. A family member living there, without you, does not qualify. You cannot have more than one main home. If you have two homes, the main home is the one you have the greatest connection with: time lived there, where your immediate family lives, where your personal property is kept, social ties, how you use each home, and ties such as work.

The exclusion also fails if you have a regular pattern of buying and selling, or building and selling, your main home, even if you live there before the sale. It fails if you have already claimed the main home exclusion twice in the 2 years immediately before the sale. Emma, in IR1229, claimed it on sales that ended on 7 November 2023 and 9 June 2024. She then agrees to sell a third property on 15 July 2025. Both earlier claims sit inside the 2 years before 15 July 2025, so the third sale cannot use the exclusion.

Mele owns 600 square metres. She lives in a 100 square metre flat and rents the house. The flat is less than half the land, so the exclusion does not apply. Pinky runs a shop from 45% of a country store and lives in the rest. The business premises exclusion does not apply, because the land is not used predominantly for the shop. The main home exclusion can apply if she lived there as her main home for more than 50% of the period. Renting a room to a flatmate can still leave the main home exclusion available. Inland Revenue covers that in QB 24/02.

When you build, you ignore the construction period for the time test, including the design phase. Construction is usually complete when the code compliance certificate is issued under the Building Act 2004. Josh, in IR1229, buys off the plans, moves in on settlement, and sells later the same year. He ignores the construction months and qualifies because he lived there for the whole period that remains. A property in a trust can use the exclusion if it was the main home of a beneficiary and either the principal settlor has no main home, or the property is the principal settlor's main home. If the principal settlor has a different main home, the trust cannot use the exclusion for a property it sells.

Business Premises, Farmland, and Inheritance

Inland Revenue excludes land used predominantly as business premises. The owner does not have to run the business there. A tenant can. A residential rental is not business premises for this exclusion. Short stay accommodation is not either, when the business is supplying accommodation and the house is not the owner's main home. Natalie, in IR1229, leases a warehouse apartment. The warehouse is 100 square metres and the apartment is 60 square metres. The work area is larger, so the exclusion applies. If the apartment were larger than the warehouse, the land would be residential and the bright line test could apply.

Farmland is outside the test when you, the owner, work it in a farming or agricultural business, or it is capable of being worked as one because of its area and nature, without major investment or modification. Renting it to someone else who farms it does not qualify. Lee's 2 hectare lifestyle block, with a house, garden, and shed, rented to a family who graze 10 sheep, does not qualify in IR1229. If a farm is subdivided and the new piece is fenced off from the farming business, that piece can become residential land. The start date stays the original registration of the undivided land.

Inherited property is outside the bright line test. The transfer from the deceased person to the executor or administrator, and from the executor to the beneficiary, is treated at the deceased person's cost, not market value, so no bright line tax arises on those transfers. A later sale by the beneficiary is also not taxable under the bright line test. Ali's house passes to his executor and then to his son Omar. IR1229 says Omar's later sale is exempt. A beneficiary who buys an extra share from another beneficiary can have a new bright line period for that extra share only.

Rollover and a Change of Share

Rollover relief means the person transferring the property is not taxed at the transfer, and the recipient takes the previous owner's start date and cost. From 1 July 2024, Inland Revenue allows it for inherited property, a relationship property agreement, a resident's restricted amalgamation, associated persons, and a transfer to a trustee where all beneficiaries have been associated with the transferor for at least 2 years before the transfer, or are charities. Some Māori land transfers and some Treaty settlement transfers also qualify. The associated persons form of relief needs the association to have lasted at least 2 years before the transfer, and it can be claimed only once for a property in any 2 year period from the first transfer. Inland Revenue's guide to the definitions is IR620.

Kai's start date is 7 July 2024. She transfers the property to her daughter Anji on 10 January 2025. They are relatives within 2 degrees, so rollover applies. Anji takes the 7 July 2024 start date and the $850,000 cost. A transfer to a niece or nephew would not qualify on that family test. Changing joint tenancy to a tenancy in common, or the reverse, does not reset the start date when each person's share stays the same. Buying an extra share does reset the clock, but only for the extra share.

Deductions and a Bright Line Loss

If the sale is taxable under the bright line test, Inland Revenue lets you deduct the cost of the property at the time of sale. That cost is the price you paid, purchase costs such as lawyers, valuers, surveyors, and real estate agents, capital improvements such as renovations, and sale costs such as lawyers and agent fees. You cannot deduct an amount you have already claimed. Keep the signed agreements, both settlement statements, invoices, and documents for the improvements.

Holding costs such as interest, insurance, rates, and repairs are generally deducted in the income year they are incurred, and only when the deduction rules are met. Personal costs are not deductible. If the property earned rental income, those costs may already be in the rental return. Do not claim them twice. If the property was not used to earn income, IR1229 says holding costs are not deductible until the sale is certain to be taxable, which is generally when you enter the binding sale agreement. Debbie and Mike sign to sell on 1 August 2025. Only the holding costs from that date to settlement on 28 August 2025 are deductible: 4 weeks of interest at $400 a week, which is $1,600, and rates and insurance of $400. A $1,000 fence repair in November 2024 is before the agreement, so it is not in that claim. A $20,000 deck is a capital improvement and forms part of the cost. Interest here is the interest only, not the capital repayments.

A bright line loss cannot be offset against salary, rental income, or business income. It can be used only against profits from other bright line sales or other land sales that are taxable under the land rules. The amount you claim in a year is limited to that land sale income. Any balance carries forward. A trust cannot distribute the loss to beneficiaries. A company cannot carry the loss forward if the ownership continuity test is not met. Zac, in IR1229, sells for $540,000 land that cost $600,000. The $60,000 loss cannot offset his $80,000 salary. The next year he makes a $100,000 profit on land bought with an intention to resell, offsets the $60,000, and is taxed on $40,000 of that profit.

Filing the Sale with Inland Revenue

Before the income tax return, complete IR833 for each residential property sold or disposed of that is taxable under the bright line test. You can complete it during the year or with the return, including in myIR. The form asks for the title identifier, the address, the start date, the end date, the sale price, the purchase price, deductible expenses, and your ownership percentage. Put your share of the net profit in the net bright line profit box. If you are filing in myIR, that profit can pre populate. Check every attached IR833 before you continue. A bright line loss is not entered in the return. Keep your own record and carry it forward. The income year is usually set by the settlement date, not by the sale agreement date that ends the bright line period. An IR3 filing checklist is the return many sole traders use for that profit.

Keep records for at least 7 years, in English or Māori unless Inland Revenue has allowed another language. That includes invoices, bank statements, working papers, a list of assets with cost and purchase date, and any loan agreement. If you claim the main home exclusion, keep records that support the claim for each year in the bright line period. An offshore RLWT person may have residential land withholding tax deducted by the conveyancer when the sale is subject to the bright line test. IR1229 says that deducted amount can be claimed as a tax credit in the income tax return. The detail is on Inland Revenue's residential land withholding tax pages. This calculator does not work out that withholding, and it does not work out the income tax on the profit.