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