bright-line test important pointsThe recent changes to the bright-line test have been in the spotlight in the past few months. Here are some bright-line test important points to note regarding the changes.

  • Where a company owns a residential property and this is either subsequently set up as a Look Through Company (LTC) or disestablished as a LTC, this is considered by the IRD to be a bright-line disposal and repurchase. It could therefore trigger bright-line profit and will definitely create a new start date.
  • Where shares are changed in a LTC that owns residential property, for bright-line purposes this will be classed as a partial transfer, and once again it could trigger bright-line profit and it will create a new start date for the portion of the property affected by the change in shareholding.
  • A subdivision of land does not restart the bright-line acquisition date for the new title. The original acquisition date for the land still applies.
  • If the use of land is changed from being a private rental to an arms-length rental, this does not affect or restart the bright-line acquisition date.
  • Special rollover relief provisions exist for the transfer of residential property via a relationship property agreement, and full relief for transfers from a deceased person to their estate and onto the estate beneficiary.
  • The government is currently seeking submissions on proposals to extend rollover relief to cover residential properties transferred to trusts and LTCs as well as a range of other related matters. Submissions close on 12th July 2021.
  • Regardless of your circumstances, no concessions for properties sold within the bright-line period will be made unless one of the specific exclusions apply.