Restoring Interest Deductibility on Rental Properties ( Cloned )

Welcome to the exciting debut of our blog series, where we embark on a captivating journey through the ever-evolving realm of property investment and management.

With the arrival of any new government comes new legislation, and there’s been no shortage of press around the property investment market and residential tenancy changes proposed by our new Government. So brace yourselves, as significant shifts in rental property taxation and regulations are on the horizon, promising a transformative odyssey for both tenants and landlords.

In this series, we'll unravel the intricacies of these changes and offer invaluable insights into what lies ahead for property management, particularly in the North Shore and Rodney areas.

Let’s begin with a spotlight on the restoration of interest deductibility on rental properties—a topic that has been hotly debated and drawn much criticism and praise across the political spectrum.

While the exact details of the plan have not yet been confirmed, the coalition agreement signed between Act and National outlines that the rollback of interest deductibility will happen faster than National’s original proposal.

Instead of the current rules allowing 50% of interest costs to be claimed, it has been indicated that soon you’ll be able to claim 80%, possibly as early as April 1st, 2024. This will be followed shortly afterward by full interest deductibility, planned to be restored by April 2025.

But what does this mean for you in practical terms?

It signifies a potential opportunity for landlords to reclaim their financial footing by offsetting interest expenses against taxable rental income. In simple terms, it could mean paying less tax and retaining more cash flow.

With interest rates on the rise, many investors have found their cash flow restricted by higher tax obligations. The Government’s proposal could help to ease those constraints and support renewed interest in property investment, with broader implications for the rental market.

With this imminent change, a stagnant housing market, and high net migration, now could be a time to seriously consider purchasing an investment property.

Experts are forecasting continued rent increases, and hot spots like the North Shore and wider Rodney area may offer healthy rental returns for investors.

Another crucial consideration is that you might already be eligible for 100% interest deductibility.

Under current legislation, houses that received their Code of Compliance Certificate (CCC) on or after March 27th, 2020, are exempt from the phased restrictions on interest deductibility for a 20-year period. This exemption applies to all owners of the property during that timeframe.

So, targeting a new build—or any home where the CCC was issued on or after that date—means you may have full interest deductibility from day one.

If purchasing an investment property is something you're exploring, we recommend seeking advice from financial professionals to maximise the benefits of interest deductibility.

If you're currently looking for a suitable investment, we’d be happy to assist by providing a free rental appraisal of any prospective properties. You can contact us at hello@vertigro.co.nz.

Lastly, make sure to stay tuned to our blog series as we continue to explore the evolving world of rental property regulations. We’ll help uncover hidden opportunities and navigate any challenges along the way.

Together, let’s chart a course toward a rental market that is equitable, transparent, and thriving for all.