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Inland Revenue

Tax Policy

Last updated 13 August 2021
Closing date 12 July 2021

Status Complete

Interest deductibility

On 23 March, the Government announced that deductions for interest expenses on rental properties will be restricted from 1 October 2021.

On 10 June, the Ministers of Finance and Revenue released a public consultation document, Design of the interest limitation rule and additional bright-line rules, 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.

Summary sheets briefly outlining specific topics covered in the discussion document are available:

A set of questions and answers are available about the Government’s policy proposals on interest limitation for residential property investors. These were prepared by Inland Revenue and published on 26 July 2021.

Submissions closed on: 12 July 2021