The government has announced changes to the "bright-line" income tax rules affecting the sale of residential land, effective from 1 July, 2024.
Under the new rules, properties sold after 1 July 2024 will only be subject to the bright-line rules if owned for less than two years.
In most circumstances, the bright-line period starts on the date the property’s title is transferred to the new owner (acquisition date) and ends when a binding sale and purchase agreement is signed when those owners sell (disposal date). If you are buying a property “off the plans” the acquisition date is when the agreement is signed.
The new rules will be retrospective: e.g., if the acquisition date was 31 August 2022, the bright-line period will expire on 1 September 2024, regardless of you acquiring the property when the 10-year rule was in place. It is important to note that the sale and purchase agreement must be signed on or after 1 July 2024 for the new bright-line rules to apply.
Caution with this information is advised as the legislation has not yet been released, and uncertainties remain regarding its details, such as its application to binding sale agreements and treatment of main home exclusions.
There are exclusions, and relief measures, including a 'main home' exclusion, which can affect whether the profit on the sale of a property is taxable. Additionally, the rules can also trigger taxable profit in cases of gifting or other kinds of transfer of residential land to associated parties.
Property owners should also consider other income tax rules that may apply, such as those governing property disposal intentions or involvement in property-related businesses. The change may not affect all property sales, particularly those already exempt under existing rules or subject to alternative tax provisions.
If you are thinking about selling your property, we strongly recommend you speak to an accountant in conjunction with any conversation you have with us.
If you would like to talk about selling your property, please get in touch.
Jenny Barns and Bailey Robertson are part of our Property team at Norris Ward McKinnon.
