Upcoming Changes to the Bright Line Test Effective July 1, 2024
Starting July 1, 2024, the applicable bright line period will be reduced to two years, regardless of property type for properties sold after this date.
Existing Bright Line Rules
The bright line test, as it currently stands, applies to properties acquired on or after March 27, 2021. If these properties sell within five years for new builds or within 10 years for all other properties, they are subject to this tax rule. The property’s settlement date marks the start of the bright line period and ends on the date a binding sale and purchase agreement is signed (the rules differ slightly for properties purchased off the plans).
Current bright-line exemptions:
- The property served as your primary residence during the ownership period.
- Other tax regulations cover the sale
- The property is used for farming or as business premises.
Details Pending
Despite the announced changes, they are not yet in effect, and some details are still pending, such as:
- The impact of property transfers into and out of trusts.
- The exact date used to calculate the start of the bright-line period.
- Clarifications on the primary home exemption
The amendment to the bright line test considerably shortens the period during which capital gains on properties are taxable, which is a favourable outcome for landlords.