When does the “Brightline test” start and finish?
This rule is:
- if you bought a residential property 1 October 2015 to 28 March 2018, inclusive: the two- year bright-line rule applies.
- if you bought a residential property on or after 29 March 2018: the five year bright-line rule applies.
When does the bright-line period start?
For standard sales of land the start of the two or five year time frame is from the date of registration of transfer of title (usually the settlement date)
When does the bright-line period end?
For standard sales of land the end date for the bright-line time frame is the date a person enters into an agreement to dispose of the property. The is usually the date of entry into agreement for sale and purchaser (usually the date of the agreement).
It only applies to residential property. A property isn’t residential if it’s mainly used for business or as farmland.
Different dates apply if you sell the land before your purchase was registered or if you bought the land as a result of a subdivision of property.
But whenever you buy a property intending to resell it, you’ll need to pay tax on any profit you make when you sell that property.
What’s the main home exception?
If you buy and sell your main home, the bright-line rule won’t apply. It’s an exception to the bright-line rule.
But you can only use the main home exception twice over any two-year or five year period depending on when you bought the property.
Residential properties held in trust can use the main home exception under the bright-line rule if the house sold was the main home of the principal settlor of the trust, or the principal settlor didn’t have a main home, and it was the main home of a beneficiary of the trust.
Check with your accountant before entering into an agreement for sale of your property if the brightline time frame might apply. We can also give you general advice about the brightline time frames and check the title to confirm the start date of the brightline time frame.