MHK Report Bright-line Period Extended to Five Years

The Minister of Revenue announced in February 2018 that a Supplementary Order Paper to the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Bill has been introduced to extend the bright-line period from two to five years.

Ian Malcolm, Managing Director of MHK Chartered Accountants Auckland, comments that this increase is simply an extension of an existing Capital Gains Tax, and that the Labour government can continue to state that this move is not an introduction of a new tax, a step they promised would not happen during their electioneering campaign.

The five-year period will only apply to residential land where the date that the person acquires an estate or interest in the residential land is on or after the date on which the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act receives Royal assent.

The two-year period will continue to apply to land where the first interest was acquired before the date of Royal assent.  In most cases, the date that a person acquires the first interest in land is the date of the sale and purchase agreement.

The Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Bill is currently at Select Committee stage.  The Bill is expected to be passed and receive Royal assent in March.

Clients have a small window between now and the date of Royal assent to enter into sale and purchase agreements for the purchase of land for that land to be subject to the two year bright-line period rather than the extended five years.

nsaTax, Taxation & Trust specialists remind clients that the bright-line rules are complex and unforgiving.  “We have seen many recent examples where clients are taxed under these rules - a situation which could easily have been avoided by some careful tax planning”

Mr Malcolm notes that this move is not unexpected, and may well herald a subsequent move increasing this further in the future. 

MHK Chartered Accountants are fringe CBD Auckland Chartered Accountants who specialise in business structuring and legally minimising all types of taxation obligations, and welcome a no-obligation discussion free of charge.  For more information please contact Ian Malcolm 09-917-2893 or 021456225, or Aaron Neels 09-917-2897. For more information on tax minimisation, chartered accountants Auckland, business advisory and business structuring please go to https://aucklandaccountant.net.nz/ .

With thanks to nsaTax, Taxation & Trust specialists, for this article