Taxation of residential investment property
As at 12 October 2021 (see the page history for details of changes)
- 12 October 2021 – Commentary released on the draft legislation proposals, including detailed explanatory information on the interest limitation proposals
- 1 October 2021 – Parliament's Finance and Expenditure Committee are now accepting submissions on the tax Bill, including the interest limitation proposals. The closing date for submissions is 9 November 2021.
- 28 September 2021 – The Government released draft legislative proposals aimed at limiting interest deductions for residential investment properties. The proposals are included in proposed amendments to the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Bill.
In March 2021 the Government announced several changes to the taxation of residential investment property including:
- extending the bright-line test for residential properties from five to ten years (this change became law in March 2021), and
- limiting interest deductions on residential investment properties (the design of the rules were consulted on).
In September 2021 the Government released draft legislative proposals aimed at limiting interest deductions for residential investment properties. These proposals will be considered by Parliament and may change.
In summary, residential investment properties capable of being used for long term accommodation would be subject to the proposed rules. However, the following exclusions and exemptions are proposed:
- an exclusion for the main family home
- exclusions for several types of residential property, and
- exemptions for new builds and for property development.
The following information sheets provide general information about how the proposed rules are intended to work:
- Interest deductibility proposals at a glance
- Properties not affected by the interest deductibility proposals
- How the rules work for certain entities
- Exemptions for property development and new builds
- How interest deductions are affected
- Changes to the bright-line property rule
For detailed information see:
- Supplementary Order Paper No 64 to the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Bill
- a regulatory impact statement prepared by Inland Revenue – Limiting interest deductibility on residential investment property, and
- a commentary containing detailed explanatory information on the interest limitation proposals.
Previous tax policy announcements and publications.
- 23 March 2021 – Government property announcements
- 24 March 2021 – Tax Bill passed [included extension to the bright-line test]
- 10 June 2021 – Interest deductibility consultation launched
- 26 July 2021 – Questions and answers on property investment proposals
- 28 September 2021 – Government releases interest limitation proposals
- 12 October 2021 – Commentary on Supplementary Order Paper released
- Government discussion document on interest deductibility (includes links to the seven summary sheets) (published 10 June 2021)
- Questions and answers (published 26 July 2021)
- Commentary on Supplementary Order Paper to the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Bill (published 12 October 2021)
- Last updated: 12 October 2021
- Changes made:
- 12 October 2021 – a commentary on the SOP was released
- 11 October 2021 – minor updates to the overview section
- 1 October 2021 – added status update (submissions can now be made to Parliament's Finance and Expenditure Select Committee), improved overview
- 28 September 2021 – Initial page published