Understanding the changes to the bright-line property rule from 1 July 2024

The bright-line property rule is undergoing significant changes starting 1 July 2024. If you're involved in buying or selling property, it's crucial to understand these updates and how they might affect your transactions.

Key Changes Effective 1 July 2024

The Timing of Your Sale Matters

• Selling on or after 1 July 2024: The bright-line rule will apply if you sell your property within 2 years of purchasing it.

• Selling before 1 July 2024: The current bright-line periods will still be in effect. These periods depend on when you bought the property:

  • Purchased between 29 March 2018 and 26 March 2021: The bright-line rule applies if you sell within 5 years.

  • Purchased on or after 27 March 2021: The bright-line rule applies if you sell within 5 years for qualifying new builds, or within 10 years for other residential properties.

Main Home Exclusion

The bright-line rule generally does not apply when selling your main home. This remains unchanged, but specific criteria must be met:

1. Usage Requirement: More than 50% of the property's area must be used as your main home.

2. Time Requirement: The property must be your main home for more than 50% of the time you owned it.

If you’re building on the land, the construction period does not count against your time of use calculation for the main home exclusion.

New Rollover Relief Rules for Associated Persons

The new rules introduce extended rollover relief for transactions involving associated persons. This is aimed at reducing tax liabilities in specific circumstances where properties are transferred between related parties. Here’s how it works:

• Who’s Covered:

  • Associated companies, or a person and an associated company

  • Relatives (within 2 degrees of relationship)

  • Trusts and their settlors, beneficiaries, and related trusts

  • A partner and a partnership

  • A look-through company and its owner

• Conditions for Relief:

  • The transferor and transferee must be associated for at least 2 years before the transfer.

  • Rollover relief can only be claimed once within any 2-year period.

These updates are designed to make the bright-line property rule more straightforward and to provide clarity around the exemptions and relief available.

Final Thoughts

With these changes, staying informed and possibly seeking advice from a property expert or tax advisor is important to ensure you understand how the new rules might impact your property transactions.