The effect of the change is that gains from the disposal of residential land acquired and disposed of within five years will be taxable, subject to some exceptions.
The bright-line test only applies to residential land. This includes land that has a dwelling on it, land where the owner has an arrangement to build a dwelling on it, and bare land that could have a dwelling erected on it under the relevant district plan. It does not include commercial premises or farmland.
There are exclusions to the bright-line test for a person’s main home, relationship property in certain circumstances and inheritances. A person may only have one main home and a person may not use the exclusion if they are deemed to habitually sell their main home.
The purpose of these changes is to ensure speculators pay tax on gains from property speculation as well as improve affordability for owner-occupiers by reducing demand from speculators.