Bright-line Bill passes second reading

The Taxation (Bright-line Test for Residential Land) Bill passed its second reading in Parliament tonight.  

The bill proposes an easy-to-understand “bright-line” test, requiring income tax to be paid on gains from residential property purchased and sold within two years.  The only exceptions are an owner’s main home, inherited property, or the transfer of relationship property.

Revenue Minister Todd McClay says the bill “is a crucial part of the Government’s push to improve compliance with the tax rules on the sale of residential property and ensure that people pay their fair share of tax”.

“The measures proposed in this bill were signalled by the Government in Budget 2015 as part of a package of proposals to improve compliance with the current land sale rules and have been further refined by public consultation,” he says.

“By supplementing the current ‘intention’ test in the Income Tax Act, the proposals in bill will make the rules simpler for taxpayers to understand and easier for Inland Revenue to enforce.”

The bill now awaits its third reading.  Once enacted, the new bright-line test will apply to gains from residential property acquired on or after 1 October 2015 that is sold within two years.