Tax tips – The bright-line rule – defining the start and end of the two-year period

The bright-line rule only applies to residential properties bought on or after 1 October 2015, but exactly what is the purchase and sales dates is causing some confusion.

Under this rule taxpayers pay tax on the gain in resale value of a property if it is bought and sold within two years, unless you’re selling your main home or another exception applies. (All existing property tax rules still apply so this does not replace the “intention” test which has no time frame attached to it.)

Different tests apply for the “date of acquisition” and the “date of disposal”.

The date of acquisition is taken to be the date of registration of transfer of the land.

By contrast, the date of disposal will generally be the date that the seller enters into an agreement for the sale of the property (i.e. a conditional agreement that is subsequently settled), not the later registration date).

This means that the date of disposal for the seller (eg conditional agreement to sell) will be earlier than the date of acquisition of the same property by the buyer (registration of transfer). This is deliberate, to prevent the bright-line test being thwarted by sellers, merely by extending the settlement date.

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