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A significant suite of policy changes has been announced, intended to make the property market fairer for first home buyers.

The main proposed changes include:

  • Extending the bright-line test to 10 years – this means that any gain made on the sale of any residential home bought after 27 March 2021 that is not your main home will be taxable on sale if sold under 10 years

  • However, newly built homes will be excluded from the new extension of the bright-line test, instead can use a 5 year bright-line test

  • Income caps and regional caps have changed for the First Home Grant & Loan schemes

  • No deductibility for interest for property bought after 27 March 2021

  • You can still claim interest as a deductible expense on existing residential rentals, however, this will be phased out over the next five years down to 0%

For further information of the proposed changes got to and check out the fact sheets on the bright line test and interest deductions

Exclusions to the bright-line rule

When you sell residential property there are three situations when the bright-line property rule does not apply.

  • The property is your main home (the rule is you can only have one main home, therefore, a family bach will not be part of the exclusion)

  • You inherited the property.

  • You're the executor or administrator of a deceased estate.

For more information on exclusions to the bright-line rule click here

Graph below showing the percent of interest you can claim as an expense (phased out over the next 5 years)

To determine what length of bright-line test a property is subject to the following flow-chart can be used

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