What are the current guidelines?
At present residential investment property owners can claim interest on loans related to the property as a claimed expense. Thereby reducing the amount of tax needed to be paid.
What are the pROposed changes?
While the government is still in consultation on the precise details of the proposed change, what we do know from 1st October 2021 the proposal is set to restrict and eventually, overtime, remove the interest deductions on residential property income.
Brought any residential properties this year?
If so and it was brought on or after March 27th 2021, you may be subject to the newly proposed extended Bright-Line test.
What is the New Zealand’s Bright-Line Test?
Anyone who sells a residential investment property within 10 years of being purchased may have to pay income tax on any financial gain from the sale. This income is classed as personal income and would be taxed as per the marginal tax rate.
This also applies to NZ tax residents who buy overseas residential properties.