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Brightline traps remain

Despite numerous submissions, only minor changes have been made to the Brightline rules by Parliament’s Finance and Expenditure Committee when reporting back on the Taxation and Remedial Matters Bill.

Thursday, March 17th 2022, 9:57AM

While the changes have been welcomed by Chartered Accountants Australia and New Zealand (CAANZ), they still leave a number of traps, says New Zealand tax leader John Cuthbertson.

They are still at the margins, and those selling their homes need to be aware that traps still abound, he says while commenting on some of the changes proposed by the select committee.

“A little bit of leniency is provided for construction of the main home.”

Where a new main home takes more than 12 months to build, potentially exposing the build to the Brightline, a new “reasonable time” test will allow the construction period to be counted as “main home days”.

He says there is still ambiguity as to whether the safe harbour construction period will cover the time from when the land is purchased, however.

Roll over relief, where essentially a property transfer is excluded from the Brightline, will only be available in limited and defined circumstances. Economic ownership and effective control of the property must broadly remain unchanged, says Cuthbertson.

“Parents will still be subject to tax, even where no intent to profit from the transaction, if they sell their portion of the property to their children within the relevant bright-line period.

“This outcome is intended. Officials have stated that, providing specific relief to individuals who can purchase residential property to on-sell to family members, would be a substantial shift in policy.”

He says one positive is a recommendation to enable parents to sell down their portion of a property without resetting the bright-line clock for any remaining portion still held.

“Some good news is that leaky buildings which are substantively reclad or earthquake prone buildings that are remediated will qualify as new builds and be subject to a five year Brightline, not the new 10 year clause.”

Additionally, a property will now qualify for the five year Brightline at the time of disposal if it previously had a new build on it, that was destroyed by natural disaster or fire.

“Unfortunately, despite the small changes, what we have now is still complex, and more like a separate piece of tax legislation, rather than a traditional Brightline,” says Cuthbertson.

“Homeowners and small property investors not only have to figure out whether they’re caught under the Brightline, but to what extent, and that is complicated.

He says Ideally the rules will be easily understood by the public, but that’s not going to be the case.

Tags: Bright-line test

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Lender Flt 1yr 2yr 3yr
AIA - Back My Build 5.44 - - -
AIA - Go Home Loans 7.99 5.99 5.69 5.69
ANZ 7.89 6.59 6.29 6.29
ANZ Blueprint to Build 7.39 - - -
ANZ Good Energy - - - 1.00
ANZ Special - 5.99 5.69 5.69
ASB Bank 7.89 5.99 5.69 5.69
ASB Better Homes Top Up - - - 1.00
Avanti Finance 8.40 - - -
Basecorp Finance 9.60 - - -
BNZ - Classic - 5.99 5.69 5.69
Lender Flt 1yr 2yr 3yr
BNZ - Mortgage One 7.94 - - -
BNZ - Rapid Repay 7.94 - - -
BNZ - Std 7.94 5.99 5.69 5.69
BNZ - TotalMoney 7.94 - - -
CFML 321 Loans 6.20 - - -
CFML Home Loans 6.45 - - -
CFML Prime Loans 8.25 - - -
CFML Standard Loans 9.20 - - -
China Construction Bank - 7.09 6.75 6.49
China Construction Bank Special - - - -
Co-operative Bank - First Home Special - 5.79 - -
Lender Flt 1yr 2yr 3yr
Co-operative Bank - Owner Occ 7.65 5.99 5.75 5.69
Co-operative Bank - Standard 7.65 6.49 6.25 6.19
Credit Union Auckland 7.70 - - -
First Credit Union Special - 6.40 6.10 -
First Credit Union Standard 8.50 7.00 6.70 -
Heartland Bank - Online 7.49 ▼5.65 ▼5.55 ▼5.55
Heartland Bank - Reverse Mortgage - - - -
Heretaunga Building Society 8.90 7.00 6.50 -
ICBC 7.49 5.99 5.65 5.59
Kainga Ora 8.39 7.05 6.59 6.49
Kainga Ora - First Home Buyer Special - - - -
Lender Flt 1yr 2yr 3yr
Kiwibank 7.75 6.89 6.59 6.49
Kiwibank - Offset 8.25 - - -
Kiwibank Special 7.75 5.99 5.69 5.69
Liberty 8.59 8.69 8.79 8.94
Nelson Building Society 8.44 ▼6.39 ▼6.09 -
Pepper Money Advantage 10.49 - - -
Pepper Money Easy 8.69 - - -
Pepper Money Essential 8.29 - - -
SBS Bank 7.99 6.95 6.29 6.29
SBS Bank Special - ▼6.15 5.69 5.69
SBS Construction lending for FHB - - - -
Lender Flt 1yr 2yr 3yr
SBS FirstHome Combo 5.44 ▼5.15 - -
SBS FirstHome Combo - - - -
SBS Unwind reverse equity 9.75 - - -
TSB Bank 8.69 6.79 6.49 6.49
TSB Special 7.89 5.99 5.69 5.69
Unity ▼7.64 5.99 5.69 -
Unity First Home Buyer special - 5.49 - -
Wairarapa Building Society 8.50 ▼6.19 ▼5.79 -
Westpac 8.39 6.89 6.39 6.39
Westpac Choices Everyday 8.49 - - -
Westpac Offset 8.39 - - -
Lender Flt 1yr 2yr 3yr
Westpac Special - 6.29 5.79 5.79
Median 7.99 6.17 5.79 5.69

Last updated: 30 October 2024 9:36am

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