Category: Investment

Proposed Changes on Interest deductions on Residential Property Income

19/5/2021

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.

Bright-line - PROPOSED EXTENSION FROM 5 to 10 Years

19/5/2021

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.

Recently built a house?

The government has proposed any new builds will continue to follow the 5 year bright-line period.

However, at this stage consultation is underway to determine what can be considered as new builds.

When does the bright-line time period start?

The date you purchase the property determines whether the bright-line period is 5 or 10 years.

5 Years: Property purchased between 29 March 2018 and 26 March 2021
10 Years: Property purchased on or after 27 March 2021
The date the property's title is registered with Land Information New Zealand (LINZ)
Properties purchased in another country, begins on the date the transfer was registered under that country's laws.
Properties purchased where the title has not yet been issued, begins when you sign the agreement to purchase the land.

WHAT ARE THE EXEMPTIONS?

Any properties purchased before 1st October 2015, or if the property is your main home, held in a trust, inherited or used as a residential business or farmland is exempt from the bright-line test.

Not sure if your residential property falls into the bright-line test?

Use this flow chart to find out where your property sits:

WANT TO KNOW MORE?

Check out the IRD Bright-Line Test Proposed Changes and Labour's reasoning behind the change Get The Facts About Bright-Line Test

Proposed Changes on Interest deductions on Residential Property Income

What are the current guidelines?

What are the pROposed changes?

Bright-line - PROPOSED EXTENSION FROM 5 to 10 Years

Brought any residential properties this year?

What is the New Zealand’s Bright-Line Test?

Recently built a house?

When does the bright-line time period start?

WHAT ARE THE EXEMPTIONS?

Not sure if your residential property falls into the bright-line test?

WANT TO KNOW MORE?

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REGISTERED TAX AGENT & TAXATION ACCOUNTANT

Proposed Changes on Interest deductions on Residential Property Income

What are the current guidelines?

What are the pROposed changes?​

Bright-line - PROPOSED EXTENSION FROM 5 to 10 Years

​Brought any residential properties this year?

What is the New Zealand’s Bright-Line Test?

Recently built a house?

When does the bright-line time period start?

WHAT ARE THE EXEMPTIONS?

Not sure if your residential property falls into the bright-line test?

WANT TO KNOW MORE?

Author

Archives

Categories

REGISTERED TAX AGENT & TAXATION ACCOUNTANT ​

What are the pROposed changes?

Brought any residential properties this year?

REGISTERED TAX AGENT & TAXATION ACCOUNTANT