Background information
On 23 March, the Government announced that deductions for interest expenses on rental properties will be restricted from 1 October 2021. The Ministers of Finance and Revenue today released a public consultation document seeking feedback on a range of design issues for implementing that proposal, including:
- Interest on a mortgage on a residential investment property (acquired before 27 March 2021) will be gradually phased out between 1 October 2021 and 31 March 2025. Other interest would immediately cease to be deductible from 1 October 2021.
- Land outside New Zealand would be excluded from the new rule as would a number of other types of properties.
- Exemptions are proposed for property developers and for owners of new builds. In addition, initial or early owners of new builds would be subject to a five year bright-line test, rather than the ten year test.
The proposals do not affect a person's main home. For more information, see:
- the Ministers' media statement, and
- the discussion document.
Also available are summary sheets briefly outlining specific topics covered in the discussion document:
- Changes to interest deductibility
- Who is affected by the interest deductibility changes?
- What type of properties are affected by changes to interest deductibility?
- The treatment of new builds under the bright-line test and changes to interest deductibility
- The development exemption
- Should interest deductions be allowed when property is sold?
- Changes to the bright-line test
How to write a submssion
Property investors are encouraged to provide feedback on the removal of mortgage interest as a deductibility expense and the extension of the bright line. Some guidance is provided here