Interest Deductibility Changes 2021

Interest Deductibility for Residential Rental Properties

The ability for property investors to deduct interest payments from their taxable income from property investments that they made before March 27, 2021 is going to be phased out over time until March 31, 2025.

However, there are some exceptions.

Revenue Minister David Parker says that these tax changes affecting property are likely to reap $1 billion over the four years they are phased in.

What will constitute a New Build?

The Government has also specified what it will constitute a “new build”.

The Government has proposed that a property be considered “new” for up to 20 years from the time its code of compliance certificate is issued, effective from March 27, 2021.

Any properties with a code of compliance issued before this date will fall outside of the new build concession. The 20-year exemption for new builds should offer some degree of relief for some investors.

When will the changes come into effect?

The newly announced regulations will come into effect from Friday October 1, 2021, presuming they are passed into law by Parliament next year.

There is still the possibility of amendments being made so some level of uncertainty remains.

This interest deductibility rule change will next be assessed by Parliament’s Finance and Expenditure Committee over the coming months.

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