Bright-line test history: the 2, 5 and 10 year rules

The bright-line test has had four settings since it began on 1 October 2015: 2 years, then 5, then 10 years with a 5-year period for new builds, and then back to 2 years for every sale agreed on or after 1 July 2024. To work out which applied to an older sale, check the sale agreement date first. If it is before 1 July 2024, the purchase agreement date picks the period. The period is then measured from title registration, as it is today.

Four settings in under nine years

Rules checked 10 November 2026. This is a guide, not tax advice; check with your accountant for your situation.

Inland Revenue now publishes two guides: IR1229 for property sold on or after 1 July 2024, and IR1227 for property sold before that date. Between them they give this map:

Notice the two different switches. The current rule is chosen by the date you sold. The older rules were chosen by the date you bought, meaning the day you entered a binding purchase agreement, not the settlement day.

2015 to 2018: the original 2-year test

IR1227 records that "On 1 October 2015 the bright-line test was introduced applying to residential property bought and sold within a certain period of time." For property acquired from 1 October 2015 to 28 March 2018, the period was 2 years.

Property acquired before 1 October 2015 was never subject to a pre-2024 bright-line period. That did not make every such sale tax-free: the intention test and the dealer and developer rules have no time limit and applied then as now. See our intention test guide.

The main home exclusion in this era used the same two tests as today: more than 50% of the land used as your main home, and lived in as your main home for more than 50% of the bright-line period. It was all or nothing.

2018 to 2021: five years

For property acquired from 29 March 2018 to 26 March 2021, the period became 5 years. The main home exclusion stayed on the same all-or-nothing 50% tests, and the same limits applied: no exclusion with a regular pattern of buying and selling or building and selling your main home, or if you had already used it twice in the 2 years before the sale.

IR1227 makes a useful simplification for this group. Because the 2-year rule took over on 1 July 2024, a property acquired on or after 29 March 2018 is caught "if you acquired the property on or after 29 March 2018 and you are selling it within 5 years or before 1 July 2024 (whichever comes first)."

2021 to 2024: ten years, and five for new builds

For property acquired on or after 27 March 2021 and sold before 1 July 2024, the period was 10 years. A qualifying new build had a 5-year period instead, applied "to the extent the property has a qualifying 'new build' on it when sold." Our new builds guide covers what qualified.

A transitional rule protected buyers caught mid-deal: a property acquired on or after 27 March 2021 is treated as acquired before that date if the buyer made an offer on or before 23 March 2021 that could not be revoked or withdrawn before 27 March 2021, for example by tender.

The main home rules also changed for this group, and this is where older sales get complicated:

• Full exclusion needed more than 50% of the land used as your main home and main home use for 100% of the bright-line period.
• Any period of 12 months or less when it was not your main home counted as main home days, and you could have more than one such period if they were not back to back.
• Longer gaps counted for a reasonable construction period, or a reasonable time out for North Island flood repairs.
• If you did not qualify in full, the taxable amount was apportioned by how much of the land, and for how long, you used as your main home.

Our main home exclusion guide sets out the apportionment formula with IRD's examples.

From 1 July 2024: back to 2 years for everyone

The Taxation (Annual Rates for 2023-24, Multinational Tax, and Remedial Matters) Act 2024, which received assent on 28 March 2024, brought in the 2-year test for sales from 1 July 2024. IR1227 sums up the changes:

• the test now looks at whether your bright-line end date is within 2 years of your start date
• the main home exclusion stays, but with the current criteria, which have no apportionment
• rollover relief was extended to associated persons, limited to people associated for 2 years before the transfer and to once in any 2-year period.

Because the switch is by sale date, the change reached back to property bought under the old rules. IR1229's example is Mia, with a start date of 5 January 2022 and a sale on 27 July 2024. Under the old rules her rental was inside a 10-year period running to 2032. Because she sold after 1 July 2024 and more than 2 years after her start date, the profit is not taxable under the bright-line test. And as IR1227 notes, "you no longer have to separate out new builds from all other properties."

How to tell which rule applied to an older sale

Work through four steps, in this order:

1. Find the sale agreement date. On or after 1 July 2024? Use the 2-year test and IR1229, and stop here.
2. Find the purchase agreement date. The day the agreement to buy became binding, "even if some standard conditions like getting finance or a building report still need to be met," as IR1227 puts it.
3. Read the period off the table above. Check the transitional offer rule if you bought around March 2021, and the new build rule if the home was new.
4. Measure the period from title registration to the sale agreement. The start and end dates work the same way as now; see bright-line dates.

Here are six example sales, each run through this site's engine:

"Inside" means taxable under the bright-line test unless an exclusion applied. C and E are the same property: signing in March 2024 put the sale inside a 10-year period, while waiting until August 2024 took it outside the bright-line test altogether. For a property you still own, the bright-line end date finder takes both dates and shows the first clear day.

The main home exclusion in each era

IR1227's Felix example shows apportionment at work. He acquired in February 2022, sold on 19 December 2023 for $1,200,000, and had paid $1,000,000. His main home used only 30% of the land for the whole 659-day period, so 30% of the sale price and cost come off. Our engine reproduces IRD's figures: $840,000 of sale price less $700,000 of cost, a net profit of $140,000, taxed at his marginal rate. Under the current rules there is no apportionment: with only 30% of the land as his main home, the whole profit would be taxable.

If you are looking back at an older sale

Older sales come up when a return is being reviewed, when an accountant tidies up past years, or when a property was sold just before the July 2024 change. A few points:

• Use IR1227 for any sale agreed before 1 July 2024. It has the old start date and end date tables, the main home rules for each group and the apportionment worksheet.
• Look for the purchase agreement. The regime turns on it, so a signed copy of the agreement is the first document to find.
• Ring-fenced losses carry forward. A bright-line loss from an older sale can still reduce later bright-line or other taxable land sale income. See ring-fenced losses.
• Tax rates differed. The 2024/25 year used composite rates because the thresholds changed on 31 July 2024. Our calculators work out tax from 2024/25 onward; for earlier years, use that year's rates.

Our guide to Labour's proposal covers the separate question of a broader capital gains tax, which is a proposal only and not law.

Questions people ask

I bought in 2022 and sold in August 2024. Does the 10-year rule apply?

No. Any sale agreed on or after 1 July 2024 uses the 2-year test, whenever you bought. If more than 2 years had passed since title registered to you, the bright-line test does not apply.

Which date decided the old 2, 5 or 10 year period?

The acquisition date, which for a standard purchase is the day you entered a binding agreement to buy, even if conditions were still to be met. The period itself still ran from title registration.

Was there ever a bright-line test for property bought before October 2015?

No. The test began on 1 October 2015, and property acquired before then was not subject to a bright-line period for sales before 1 July 2024. Other land rules could still apply.

Is there still a 5-year rule for new builds?

Not for sales agreed on or after 1 July 2024. Every property uses the 2-year test. The 5-year new build period only matters for sales before that date.