How a bright-line gain is taxed: marginal rates, tax year and provisional tax

New Zealand has no separate capital gains tax rate. A taxable bright-line gain is simply added to your other income and taxed at your marginal rates, the same 10.5%, 17.5%, 30%, 33% and 39% brackets that apply to wages. The year it is taxed in is usually the income year of settlement, not the date you signed the sale agreement. Because the gain lands on top of your other income, most of it is often taxed at 33% or 39%. A $100,000 gain costs $30,169.50 in tax on a $40,000 income and $37,800.00 on a $160,000 income in 2026/27. A large gain can also pull you into provisional tax for the following year. Rules checked 10 November 2026.

No separate rate: the gain is income

Inland Revenue treats the net profit from a bright-line sale as ordinary income. It goes in your income tax return and is taxed at your marginal rate, as IRD's own examples put it: "Income tax is calculated on the $140,000 profit at Felix's marginal tax rate" (IR1227 p32). You also file an IR833, the bright-line property sale information form, for each taxable sale (IR1229 p45).

The individual rates for 2026/27 are:

Two things follow. First, the gain is taxed on net profit, after purchase costs, improvements, selling costs and any deductible holding costs; our deductible costs guide covers those. Second, the scale is progressive. The gain is not taxed at one flat rate: each slice is taxed at the rate for the bracket it lands in, starting from where your other income stops. Some calculators online get this wrong and apply a single rate to the whole gain.

If you co-own the property, only your share of the net profit is added to your income.

Worked examples: a $100,000 gain at three income levels

Here is the same $100,000 net gain, settled in 2026/27, for three people with different other income. Figures are from this site's engine, which uses the same IRD-tested brackets as our sister tax calculator.

Even the person on $40,000 pays 33% on most of the gain, because the gain itself pushes their income up through the brackets. Someone on a higher income starts further up the scale, so more of the gain is taxed at 39%.

A smaller gain is still taxed the same way. On a $40,000 income, a $25,000 gain is taxed as $13,500 at 17.5% and $11,500 at 30%, which is $5,812.50.

The gain can also affect credits that depend on your income. For example, the independent earner tax credit reduces from $66,000 and stops at $70,000 of income in 2026/27, so a gain can take it away for that year. To test your own figures, enter your other income in the bright-line tax calculator.

Which tax year: settlement decides

Two dates do two different jobs. The sale agreement date (the bright-line end date) decides whether the sale is caught by the 2-year test. The settlement date decides which income year the gain is taxed in. IR1229 (p46) says: "Usually, the date of settlement will determine the income year the income should be included". The NZ income year runs from 1 April to 31 March.

With a tax agent and an extension of time, end-of-year tax for 2026/27 is due on 7 April 2028 instead.

A settlement in late March or early April can move the gain a full year. That shifts when the tax is due, and it decides which year's other income the gain is stacked on. If your income is much lower in one year, for example because you stopped work, the year of settlement can change the tax. Settlement dates are usually agreed in the sale agreement, so this is worth thinking about before you sign. Use the bright-line end date finder to check when a sale agreement would fall outside the period altogether.

Provisional tax: the year after a big gain

A bright-line gain usually has no tax taken off at the time of sale (the exception is residential land withholding tax for offshore sellers; see our selling from overseas guide). So the tax on it becomes residual income tax, or RIT: the tax on your income less PAYE and other credits.

That matters because of the provisional tax threshold. Inland Revenue's rule is that you pay provisional tax for a year if your RIT for the previous year was more than $5,000 (IR289). A gain settled in 2026/27 that leaves more than $5,000 of RIT puts you into provisional tax for 2027/28. As the $25,000 example above shows, that does not take a very large gain.

The standard option assumes it happens again

On the standard option, provisional tax is last year's RIT plus 5%, paid in three instalments. For an employee whose PAYE was right, the 2026/27 RIT is roughly the tax on the gain. Using the three examples above:

For 2027/28 the standard instalment dates would be 28 August 2027, 15 January 2028 and 7 May 2028. The tax on the gain itself is due on 7 February 2028, so without planning the first two instalments and the gain's own tax bill all land within about six months.

A one-off gain and the estimation option

A property sale is usually a one-off, so the standard option can ask for tax on income you will not have. IRD's estimation option page says it may suit you if your income "will significantly increase or decrease over the next year", and that "If you do not think you'll have any residual income tax to pay, you can estimate your provisional tax at $0." You can estimate at any instalment date, and on other dates up to the final instalment.

The catch is interest. On estimation, IRD charges interest if your estimate turns out lower than your actual RIT, and a penalty can apply if the estimate is too low. On the standard option with RIT under $60,000, interest generally only starts after the end-of-year due date. Our sister site has a full provisional tax guide with the options, dates and interest rules.

Losses, offshore sellers and other owners

• A loss. If costs are more than the sale price, the loss is ring-fenced and does not reduce your other income. See ring-fenced losses.
• Offshore sellers. Residential land withholding tax may be deducted at settlement and is claimed as a credit against the tax on the gain (IR1229 p47).
• Companies and trusts. The same gain is calculated the same way but taxed at that entity's rate, not the individual scale above.
• Older sales. Sales with agreements before 1 July 2024 used longer periods, and some used apportionment for a main home. See bright-line history.

Whether a capital gains tax beyond the bright-line test arrives depends on the next government; the 2026 election comparison tracks the proposals, none of which is law.

This is a guide, not tax advice. Timing a settlement and choosing a provisional tax option can both change what you pay, so check with your accountant for your situation.

Questions people ask

What rate is a bright-line gain taxed at?

Your marginal income tax rates. The net gain is added to your other income for the year and taxed through the 10.5%, 17.5%, 30%, 33% and 39% brackets for 2026/27. There is no separate capital gains rate.

Which tax year does a bright-line gain go in?

Usually the income year in which settlement happens. The income year runs 1 April to 31 March, so a sale settled on 2 April 2026 is taxed in 2026/27.

Will a bright-line gain put me into provisional tax?

It can. If the gain leaves you with more than $5,000 of residual income tax for the year, you pay provisional tax the following year. If the gain was a one-off, the estimation option lets you estimate lower, with interest if you estimate too low.

Is the whole gain taxed at my top rate?

No. Each slice of the gain is taxed at the rate of the bracket it falls in, starting from your other income. On a $40,000 income, a $100,000 gain is taxed partly at 17.5%, 30% and 33%.