Changes to Brightline Test

Home News & Views Changes to Brightline Test

Currently, the bright-line rules impact properties acquired on or after March 27, 2021, and sold within either five years for qualifying new builds or ten years for other properties. The bright-line period commences from the transfer date and concludes upon entering a binding sale and purchase agreement, with some variance for off-the-plan purchases.

Certain exemptions from the bright-line rules exist:

Periods where the property serves as the primary residence.
Sales subject to other tax regulations.
Properties categorised as farmland or business premises.

Effective July 1, 2024, the bright-line period will shorten from ten years (or five for new builds) to two years. Although these changes are not yet in force, the government has outlined that properties sold after July 1, 2024, will only fall under the bright-line rules if sold within two years of purchase.

However, certain aspects of the bright-line changes remain uncertain, including:

Whether property transfers in and out of trust ownership will trigger the bright-line rules.
Determination of the calculation start date for the bright-line period.
Clarification on the "main home" exemption.

The adjustments to the bright-line test regime are likely to be well-received by landlords seeking to capitalise on this modification.

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