A quick update on the extension of the Bright-Line Test and the status of the Overseas Investment Amendment Bill.
Extension of the Bright-Line Test
The Taxation (Annual Rates for 2017-18, Employment and Investment Income, and Remedial Matters) Act (“the Act”) received Royal Assent last Thursday, being 29 March 2018. The Act amends a number of pieces of legislation but relevant to those involved in property is the extension of the Bright-Line Test.
The Act has extended the Bright-Line Test from 2 to 5 years. If you sell a residential investment property (with the exception of the family home) within 5 years of the purchase date, you will be taxed on the proceeds of sale. The extension applies to all residential property acquired from 29 March 2018.
Overseas Investment Amendment Bill
We have had a few queries about the status of the Overseas Investment Amendment Bill (“Bill”). The Bill proposes that that overseas persons who are not resident in New Zealand will generally not be able to buy existing houses or other pieces of residential land.
A natural person is an overseas person under the Act if they are neither a New Zealand citizen nor “ordinarily resident in New Zealand”. The Bill modifies the definition of “ordinarily resident in New Zealand” for the purposes of the new residential land provisions. Under that new definition, a person will be ordinarily resident here if they hold a permanent resident visa and have been residing in New Zealand for at least a year and have been present in New Zealand for at least 183 days in the past year. The definition of “ordinarily resident in New Zealand” remains as it is in the current Act for all other purposes.
The Bill has had its first reading and is currently at select committee for review.