Edmonds Judd

Bright line Test

Property briefs

The new government has brought in significant changes to the property sector; we outline what these could mean for you.



Bright-line test changes

Under the current framework, the bright-line rules affect properties that were acquired on or after 27 March 2021 and sold within five years for qualifying new builds or within 10 years for all other properties. The bright-line period starts on the date that the transfer took place and ends on the date which you enter into a binding agreement for sale and purchase to sell your property (this is slightly different if you purchased your property off the plans).

There are exclusions where the bright-line rules do not apply such as:

  • For the period which the property has been your main home
  • If the sale of your property is subject to other tax rules, and
  • Where your property is farmland or business premises.

As of 1 July 2024, the bright-line period will be reduced from 10 years (or five years for new builds) to two years. While the new rules have not yet come into effect, the government has announced that properties sold after 1 July 2024 will only be subject to the bright-line rules if they are sold within two years from when your property was purchased.

There are still some details that have not yet been confirmed relating to the bright-line changes such as:

  • Whether the bright-line rules are triggered by the transfer of property in and out of trust ownership
  • What date the bright-line period is calculated on, and
  • The ‘main home’ exemption.

The changes to the bright-line test regime will likely be very welcome to landlords who look to benefit greatly from this change.


RMA legislation

In December 2023, the government repealed the Natural and Built Environment Act 2023 and the Spatial Planning Act 2023, that came into force in August 2023, and were intended to replace the Resource Management Act 1991 (RMA). It has, however, retained:

  • The fast-track consenting scheme which is similar to what was available during the Covid period, and
  • The Spatial Planning Boards whose role is monitoring, evaluating and reporting on the effectiveness of the Act to relevant ministers.

The government has confirmed it will ensure Treaty of Waitangi settlements are upheld.

This is the first phase of a three-stage plan which intends to replace the RMA with new resource management laws.

The final goal is to repeal the RMA entirely and replace it with legislation that the government believes is more fit for purpose.



Rental and tenancy updates

Notice periods: Month-to-month/periodic tenancy rules apply where tenants must give 28 days’ notice to leave the property and landlords must give their tenants 48 days’ notice if they intend to sell, move into the property or carry out major renovations. The government’s new proposed notice periods will change this to 21 days for tenants and 42 days for landlords.


Mortgage interest deductibility: This is the ability for landlords to deduct the interest they pay on their mortgage as a business expense thereby reducing their taxable income. The government announced on 10 March 2024 that as of 1 April 2024, landlords may claim back 80% of their interest for this purpose. The announcement also confirmed that from 1 April 2025 mortgage interest deductibility will increase to 100% of interest.


Ninety day no-cause evictions: The government’s restoration of no-cause evictions is another major change on the horizon. Landlords will no longer have to provide tenants with an explanation as to why they have been evicted if they give tenants 90 days’ notice to leave their property.


Pet bonds: The introduction of pet bonds will allow landlords to require tenants to pay a higher bond, rather than four-weeks’ rent if they intend to have a pet on the property. Damage caused by pets would then be deducted from the bond for the repairs to the property.


These changes to the status quo for residential tenancies will have significant impacts for landlords and tenants alike. The government has not, however, indicated when legislation will be introduced on all the above issues.



If you would like any more information or advice on any of the above topics, please don’t hesitate to contact us.



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