NZ Property Tax Rules Summary

A complete summary of New Zealand residential property tax rules as at April 2026. Covers bright-line test, main home exemption, interest deductibility, ring-fencing of losses, mixed-use assets, and development/subdivision tax triggers. All rules sourced from the Income Tax Act 2007 and current IRD guidance.

Bright-Line Calculator Interest Deductibility Property Sale Tax Triggers

Bright-Line Test

The bright-line test taxes profits on residential property sold within a defined holding period. For properties sold on or after 1 July 2024, the bright-line period is 2 years, regardless of when the property was purchased.

Sale Date	Bright-Line Period	Notes
On or after 1 July 2024	2 years	Current rule, applies regardless of purchase date
27 March 2021 to 30 June 2024	10 years (5 years for new builds)	Historical rule for sales before 1 July 2024
29 March 2018 to 26 March 2021	5 years	Historical rule
1 October 2015 to 28 March 2018	2 years	Original rule
Before 1 October 2015	Not applicable	Pre-bright-line era

The bright-line start date is generally the settlement date (when title transfers to you). The end date is the date the sale and purchase agreement is signed. Profits are taxed at your marginal income tax rate (up to 39%).

Main Home Exclusion

The main home exclusion removes a property from the bright-line test if it was used as your main home. Rules depend on when the property was acquired:

Acquisition Date	Test Applied
On or after 1 July 2024	Exclusion applies if property used as main home for more than 50% of the bright-line period
27 March 2021 to 30 June 2024	Predominant use test: apportioned exclusion for periods where not used as main home
Before 27 March 2021	All-or-nothing: full exclusion if used as main home for more than 50% of ownership

More than 50% of the land area (including yard, gardens, and garage) must have been used for private residential purposes to qualify as a main home.

Interest Deductibility (Rental Property)

From 1 April 2025, 100% of interest on funds borrowed for residential rental property is deductible, ending the phased restrictions that applied from October 2021.

Income Year	Interest Deductible (Existing Properties)	Interest Deductible (New Builds)
2026/27 (1 Apr 2026 to 31 Mar 2027)	100%	100%
2025/26 (1 Apr 2025 to 31 Mar 2026)	100%	100%
2024/25 (1 Apr 2024 to 31 Mar 2025)	80%	100%
2023/24	50%	100%
2022/23	75% (pre-27 Mar 2021) / 0% (post)	100%
2021/22 (from 1 Oct 2021)	100% (pre-27 Mar 2021) / 0% (post)	100%

New builds: Properties with a Code Compliance Certificate (CCC) issued on or after 27 March 2020 qualify as new builds and were always exempt from the interest limitation rules.

Ring-Fencing of Rental Losses

Rental losses are "ring-fenced" and cannot be offset against other income (salary, business income, etc). This rule applies regardless of interest deductibility changes.

Rule	Detail
Can offset against	Other residential rental income only
Cannot offset against	Salary, wages, business income, capital gains
Carry forward	Unused losses carry forward indefinitely
On sale	Released only if sale is taxable (e.g. under bright-line test)

Mixed-Use Asset Rules (Holiday Homes, Baches)

The mixed-use asset rules apply when a property is used both privately and to earn income, and is unused for 62 or more days in the year.

Test	Rule
Trigger threshold	Asset unused for 62+ days in the income year
Also applies to	Boats and aircraft costing $50,000+
Expense apportionment	Deduction formula: income days / (income days + private days)
Opt-out option	Available if gross income less than $4,000 or expenses less than $0 (deemed no income)

Chattels Depreciation

Depreciation on the residential building itself is 0% (since 2011). However, chattels (removable items not part of the building) can still be depreciated.

Chattel Type	Typical Depreciation Rate (DV)
Carpets	33%
Curtains and drapes	25%
Furniture (freestanding)	20%
Heat pumps	20%
Whiteware (fridge, washing machine, stove)	20%
Hot water cylinders	20%
Light fittings	13.5%
Low-value assets (under $1,000 each)	100% in year of purchase

Other Land Sale Rules

Even if a sale is outside the 2-year bright-line period, other land sale rules under the Income Tax Act 2007 can still tax the profit:

Section	Rule
s CB 6	Land acquired with purpose or intention of disposal
s CB 7	Land acquired as part of a business of land dealing
s CB 8	Land developed for sale (10-year rule)
s CB 9	Land sold within 10 years by land dealer
s CB 10	Land sold within 10 years by developer or builder
s CB 12	Land developed or subdivided within 10 years of acquisition
s CB 13	Land with significant development or subdivision work
s CB 14	Land sold after zoning change or other public work

GST and Residential Property

Situation	GST Treatment
Long-term residential rental	Exempt (no GST on rent, cannot claim GST on expenses)
Short-stay accommodation (Airbnb, bach)	Taxable if turnover exceeds $60,000
Commercial property rental	Taxable (15% GST)
Property developer sales	Taxable if GST-registered