RSS Feed

Brightline application for 'private transfer' of inherited properties

Monday, December 14, 2020

This week's question comes from Irene B and the answer is kindly provided by Amanda Watt of Shortland Chartered Accountants. The answer is intended to be for general information only and not tax advice.


We inherited a residential property which was also in a Company ( we inherited the company). After a time we sold this property from the company to a trust. The only two directors of the Company are also the only two trustees of the Trust. Effectively we the owners of the property sold it to ourselves. We now want to sell this property after two years of it being in the Trust. Is it subject to the Bright Line test given that it was inherited property?



The starting point is always that any residential property purchased on or after the 29th of March 2018 and sold within five years is subject to the Brightline rules. As with many other tax rules, certain exemptions apply. 

Inherited property is one such exemption. If you inherit a property and then sell it within five years then the sale is exempt from the Brightline rules. 

In this instance, however, it is unclear how the company was inherited. Assuming that you've inherited the shares and the company only owned the property then the sale would not be caught by Brightline rules. It is important to note that under this particular exemption, you need to inherit the property as part of the Will of the deceased person as opposed to having "bought" it from them and/or transferred the shares (or property) prior to death

The transfer of the property from the company to the trust is considered a sale for the purposes of the Brightline rules. Ergo, if the property is sold within five years it will be subject to the Brightline test and you will be taxed on the gain. For the purposes of the Brightline rule, the property's prior ownership period in the company is not counted when determining how long the trust is considered to have owned the property. You would want to ensure that the original transfer from the company to the trust was at market value. 


Do you have any tenancy related questions? Write to us at [email protected] or hit us up on our social channels here and here





Recent Posts


Q&A LIM reserve bank investor Standards New Zealand finance Kris Pedersen Mortgages and Insurance Property (Relationships) Act interest rates Sponsored post opes partners RTAA 2019 election 2017 housing affordability yield debt to income warren buffett insulation RBNZ Investor story ask an expert television buying rules anz meth structure extractor fan legal cost How to partners privacy inflation cat heater government warm up new zealand rtaa2020 anti-social behaviour quiet enjoyment rta reform sale and purchase Gluckman letting income election2020 Editor's Choice trademe khh rent shortland chartered accountants subdivision heating Question and answer sublease property maintenance maintenance auckland winz property bankruptcy tenant interest deductibility Must knows education tenancy issues re agent trespass airbnb HHS tenancy tribunal Guest blog commerce commission Landlording shower dome bond form robert kiyosaki Case study HHGA relationship apia Keith Hay Homes clnz DTI bad tenant interest only travel bubble management minor dwelling parry v inglis advice scotney williams covid-19 Jeff Bezos brightline personal growth house prices return fixed-term tenancy rental wof barfoot and thompson ird market ventilation tax bond early termination initio negotiation skill shortage property cycle letting fee first home buying CCC nzpif investment strategy housing package rental market asbestos development rent increase daikin interest limitation insurance p lab speculator cgt recycling equity financial advisers act Level 4 property management banking termination market rent CoreLogic data security TCIT renovation equity inspection Investment tip principal and interest holiday house landlord smoke alarm capital gain lvr heat pump short-term rental meth contamination auckland council trust retaliatory notice legal housing bubble will watercare Must know cash-flow rent arrears worksafe property apprentice kiwibuild rent control productivity business ocr twg report building mortgage positive cash flow water bill rta damage Tribunal case study buyer's agent sale and purchas debt enforcement tenancy services buying boarding house short term rental lockdown HSWA wealth creation beginner investor ring-fencing Holler unitary plan Market report wins mindset property value Zodiak Management gluckman report off the plan


Introducing Our Partners
Principal Sponsor - Kris Pedersen Mortgages & Insurance logo Gold Sponsor - Barfoot & Thompson logo Gold Sponsor - CoreLogic logo Property Apprentice logo The Insulation Warehouse logo The Renovation Team logo The New Zealand Property Investors' Federation logo