Bright-line test and family transactions (s CZ 39)

This fact sheet accompanies “IS 23/02: Income tax – application of the 5 year s CZ 39 bright-line test to certain family and close relationship transactions”. IS 23/02 considers when the bright-line test in s CZ 39 of the Income Tax Act 2007 applies to disposals of residential land (that is not a main home) in family transactions.

This fact sheet considers only the s CZ 39 bright-line test, which may apply if you entered into a binding agreement to purchase residential land from 29 March 2018 to 26 March 2021 (inclusive). If you purchased residential land after 26 March 2021, the 10 year or 5 year (for new builds) bright-line test in s CB 6A of the Income Tax Act 2007 may apply instead.

A separate interpretation statement on the application of s CB 6A to the family and close relationship transactions considered in IS 23/02 is intended to be released in 2023.  However, the conclusions reached in IS 23/02 are likely to apply to s CB 6A.