The bright-line tax rules seem to become more complicated every year as the Government makes change after change.
The bright-line rules are strict. They do not take into account any unexpected changes in your circumstances such as a job loss, relationship breakup, or relocation. Nor is intention considered either.
Set up to clip the ticket on capital gains made from selling a residential property, the bright-line rules are centred around when a property is purchased and when it is sold, but the triggering points have changed several times since the rules were first created.
Initially the rules were triggered by buying and selling within 2 years. That is for properties purchased between 1 October 2015 and 28 March 2018.
Then the 2-year timeframe became 5 years for properties acquired between 29 March 2018 and 26 March 2021.
And now, since 27 March 2021, the bright-line rules apply to residential property sold within:
- 5 years for qualifying new builds; and
- 10 years for all other properties.
And the changes just keep coming. 2023 legislation brought more amendments making it very challenging to keep up with the different shades of rules.
The key thing to remember here is there are many carve outs, and the rules are super complex!
Getting advice before you put your property up for sale is critical, as failing to do this could leave you with a hefty and unexpected tax bill.