There have been some big announcements by the government lately.
The bright line test change to extend it from 5 to 10 years applies to properties on or after 27 March 2021 ( anything bought before this will be subject to the 5 year rule, and new builds are exempt and will stay at 5 years)
So what does this mean?
Well in the simplest of terms if you buy a house now, and rent it out, rather than living in it as your main home then if you re-sell it within 10 years and make a gain on it, that gain is taxable.
If you buy a house and use it as your main home and sell it within the 10 years, then you can do this without paying income tax provided you fit the main home exemption criteria
- You must have used the house for the majority of the time that you have owned it as your main home.
- You must have occupied the majority of the property ( i.e. if it has a second unit which takes up more than 50% of the property and you rent that out, then the exemption may not apply
- you cannot have used the main home exemption twice or more over the 2 year period immediately before you sold your main home
There is also a change of use rule which has been introduced. If you do not use the property as you main home for any continue period or periods of 12 months or more during the bright line, the main home will not apply to those periods and you will pay tax on the portion of profit that relates to that period.
Note the above is given as general information, you need to get specific advice as each situation is different.