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Bright line tax inches closer

Controversial bright line tax inches into law.

Wednesday, November 4th 2015, 3:07PM 1 Comment

by Miriam Bell

The Taxation (Bright-line Test for Residential Land) Bill has now passed its second reading in Parliament.

While the start date for the bright line test was October 1, the hotly debated measure won’t actually become law until it passes its third reading in Parliament.

Once that occurs, the bright line test will require income tax to be paid on any gains from residential property purchased on or after October 1 that is sold within two years.

There will be some exceptions to the bright line test. They include the sale of an owner’s main home, inherited property, or the transfer of property in a relationship settlement.

Revenue Minister Todd McClay said it is a crucial part of the Government’s push to improve compliance with the tax rules on the sale of residential property.

It will ensure that people pay their fair share of tax, he said.

“By supplementing the current ‘intention’ test in the Income Tax Act, it will make the rules simpler for taxpayers to understand and easier for Inland Revenue to enforce.”

There has been much speculation about how the bright line test might impact on Auckland’s supercharged market.

Labour Party Housing spokesperson Phil Twyford said the latest QV data, which shows Auckland house values are still rising, proves the spectre of the bright line test hasn’t curbed speculation.

“This much-touted measure to clamp down on skyrocketing house prices has been totally ineffective at reducing prices. It has failed to deter speculators from buying into the Auckland market.”

However, given the bright line tax has yet to become law, it is probably too soon to ascertain any impact from it.

Previously, both Chartered Accountants Australia and New Zealand and the New Zealand Law Society have voiced their concerns about the bright line tax.

Both groups are concerned that it will be ordinary people forced to sell their homes, due to changed personal circumstances, who will be caught out by the test rather than property speculators.

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Comments from our readers

On 4 November 2015 at 9:39 pm trytree said:
I brought my 2nd rental property October last year 2014 , my wife passed away Feb 2015 and with this bright line test, although I am ok , it renders that my financial position has changed and I need to sell rental puts me in this bracket, not fair

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Lender Flt 1yr 2yr 3yr
AIA - Back My Build 6.19 - - -
AIA - Go Home Loans 8.74 7.24 6.79 6.65
ANZ 8.64 7.84 7.39 7.25
ANZ Blueprint to Build 7.39 - - -
ANZ Good Energy - - - 1.00
ANZ Special - 7.24 6.79 6.65
ASB Bank 8.64 7.24 6.79 6.65
ASB Better Homes Top Up - - - 1.00
Avanti Finance 9.15 - - -
Basecorp Finance 9.60 - - -
Bluestone 9.24 - - -
Lender Flt 1yr 2yr 3yr
BNZ - Classic - 7.24 6.79 6.65
BNZ - Green Home Loan top-ups - - - 1.00
BNZ - Mortgage One 8.69 - - -
BNZ - Rapid Repay 8.69 - - -
BNZ - Std, FlyBuys 8.69 7.84 7.39 7.25
BNZ - TotalMoney 8.69 - - -
CFML Loans 9.45 - - -
China Construction Bank - 7.09 6.75 6.49
China Construction Bank Special - - - -
Co-operative Bank - First Home Special - 7.04 - -
Co-operative Bank - Owner Occ 8.40 7.24 6.79 6.65
Lender Flt 1yr 2yr 3yr
Co-operative Bank - Standard 8.40 7.74 7.29 7.15
Credit Union Auckland 7.70 - - -
First Credit Union Special - 7.45 7.35 -
First Credit Union Standard 8.50 7.99 7.85 -
Heartland Bank - Online 7.99 6.69 6.45 6.19
Heartland Bank - Reverse Mortgage - - - -
Heretaunga Building Society 8.90 7.60 7.40 -
HSBC Premier 8.59 - - -
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 7.85 7.05 6.75 6.59
Lender Flt 1yr 2yr 3yr
Kainga Ora 8.64 7.79 7.39 7.25
Kainga Ora - First Home Buyer Special - - - -
Kiwibank 8.50 8.25 7.79 7.55
Kiwibank - Offset 8.50 - - -
Kiwibank Special - 7.25 6.79 6.65
Liberty 8.59 8.69 8.79 8.94
Nelson Building Society 9.00 7.75 7.35 -
Pepper Money Advantage 10.49 - - -
Pepper Money Easy 8.69 - - -
Pepper Money Essential 8.29 - - -
Resimac - LVR < 80% 8.84 ▼8.09 ▼7.59 ▼7.29
Lender Flt 1yr 2yr 3yr
Resimac - LVR < 90% 9.84 ▼9.09 ▼8.59 ▼8.29
Resimac - Specialist Clear (Alt Doc) - - 8.99 -
Resimac - Specialist Clear (Full Doc) - - 9.49 -
SBS Bank 8.74 7.84 7.45 7.25
SBS Bank Special - 7.24 6.85 6.65
SBS Construction lending for FHB - - - -
SBS FirstHome Combo 6.19 6.74 - -
SBS FirstHome Combo - - - -
SBS Unwind reverse equity 9.95 - - -
Select Home Loans 9.24 - - -
TSB Bank 9.44 8.04 7.55 7.45
Lender Flt 1yr 2yr 3yr
TSB Special 8.64 7.24 6.75 6.65
Unity 8.64 6.99 6.79 -
Unity First Home Buyer special - - 6.45 -
Wairarapa Building Society 8.60 6.95 6.85 -
Westpac 8.64 7.89 7.49 7.25
Westpac Choices Everyday 8.74 - - -
Westpac Offset 8.64 - - -
Westpac Special - 7.29 6.89 6.65
Median 8.64 7.29 7.32 6.65

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