The bright-line test on residential property sales will be extended from two to five years, the government has confirmed.
Photo: RNZ / Cole Eastham-Farrelly
The change will be made by adding an amendment to legislation currently making its way through Parliament.
It means profits from residential investment properties which are bought and sold within five years could be taxed.
Revenue Minister Stuart Nash said the extension would help dampen property speculation and make homes more affordable.
"This proposal will ensure that residential property speculators pay income tax on their gains and makes property speculation less attractive.
"Reducing speculative demand will also help improve housing affordability for owner-occupiers. Current exemptions from the bright line test will remain, this includes the exemption for the main home of owner-occupiers of residential property."
Mr Nash said the passage of the bill would also enable the Tax Working Group to factor the change into any consideration of a comprehensive capital gains tax.
The extension would apply to residential investment properties purchased from the date on which the bill received the Royal Assent, which is expected in March.