What is the bright-line test?

It is Inland Revenue's rule that profit on residential property sold within the bright-line period is taxable, unless an exclusion or rollover relief applies.

How long is the bright-line period now?

For property sold on or after 1 July 2024 it is 2 years, counted from when title is transferred to you to when you enter into a contract to sell. Different timeframes apply to earlier sales.

Does the bright-line test apply to my main home?

Generally not, when the property has been your main home and your use meets the criteria. Inland Revenue has specific guidance for people with more than one home or a flatmate.

Can I owe tax on a property sold after the bright-line period?

Possibly. Tax can apply if you bought with the intention to sell, or have a pattern of buying and selling property.

Seller guide

The bright-line test: when selling a property can mean tax

If you sell a residential property soon after buying it, the profit can be taxable. The bright-line test is Inland Revenue's rule for that. This page explains the idea. Whether it applies to you is a question for Inland Revenue or your accountant.

Sources read 8 October 2026.

What the test does

When you sell residential property within the bright-line period, any profit is taxable unless an exclusion or rollover relief applies.

How long the period is

For property sold on or after 1 July 2024, the test asks whether your bright-line end date is within 2 years of your bright-line start date. The period generally starts when title to the property is transferred to you and ends when you enter into a contract to sell. Different timeframes apply to sales before 1 July 2024, so if your sale is earlier, check Inland Revenue's guidance for your dates.

The main home exclusion

Generally the test does not apply to a sale of property that has been your main home, when your use of it meets certain criteria. Inland Revenue has separate guidance for people who use two or more homes, or who rent a room to a flatmate. Inherited property and transfers in a relationship settlement are also covered by exceptions.

Tax can apply outside the period too

Even when you are outside the bright-line period, tax can apply if you bought the property with the intention of selling it, or if you have a pattern of buying and selling properties.

Where to check

Inland Revenue has a property tax decision tool to help work out whether a sale is taxable. Do this before you list, not after you have a buyer.

A note on advice

This page is general information, not legal, tax or financial advice. Talk to your lawyer or conveyancer, and an accountant for tax, before you decide.

Common questions

What is the bright-line test?: It is Inland Revenue's rule that profit on residential property sold within the bright-line period is taxable, unless an exclusion or rollover relief applies.
How long is the bright-line period now?: For property sold on or after 1 July 2024 it is 2 years, counted from when title is transferred to you to when you enter into a contract to sell. Different timeframes apply to earlier sales.
Does the bright-line test apply to my main home?: Generally not, when the property has been your main home and your use meets the criteria. Inland Revenue has specific guidance for people with more than one home or a flatmate.
Can I owe tax on a property sold after the bright-line period?: Possibly. Tax can apply if you bought with the intention to sell, or have a pattern of buying and selling property.

Sources

Related guides

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