Rental property bright-line rule changes

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There are three key changes to the bright-line rules which are the rules that tax gains on the sale of residential property.

From 1 July 2024, the bright-line period returns to its original form of 2-years. This means, if you sign an agreement on or after 1 July 2024 to sell a residential property, and the sale does not occur within 2 years from when you acquired the property, then the bright-line test will no longer apply.

When working out if the 2 year bright-line period applies, for standard transactions, the acquisition date is the date the title changed to your name, and the sale date is the date you sign an agreement to sell the property. If your transaction falls inside the 2-year period, you then need to consider if one of the exemptions could apply, such as the main home exemption, or the farmland or business premises exemption.

The main home exemption is also changing from 1 July 2024 back to its original form. This means the main home exemption will apply if the property has been used predominantly, for most of the time you owned the land, for a dwelling that is your main home. If it is a new home, the construction period is ignored.

The final change is the extension of roll-over relief to include all transfers between associated persons, not just transfers to or from trusts. Roll-over relief ensures that certain transfers of residential property are not taxed at the time of transfer. From 1 July 2024, all transfers between associated persons will have roll-over relief, so long as the transfer price is not more than the cost price, and so long as roll-over relief has not been used more than once in a 2-year period.

Contact us when you’re thinking about selling so we can help you work out how these regulations apply.

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