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PROPOSED CHANGES TO INTEREST DEDUCTIBILITY ON RENTAL PROPERTIES

The government is currently considering new interest limitation rules. These will reduce the ability of residential investment property owners to claim interest as a deductible expense.

They are expected to be passed into law mid to late March 2022 and will be backdated to apply from 1 October 2021 for:

  • Residential property acquired on or after 27 March 2021, interest cannot be claimed as an expense from 1 October 2021, unless an exclusion or exemption applies. 
  • Property acquired before 27 March 2021, the ability to deduct interest on existing loans is being phased out over 4 years, ending 31 March 2025 (see the image below). Interest deductions for any new loans drawn down on or after 27 March 2021 won't be allowed from 1 October onwards.

Exemptions and exclusions

Some types of residential accommodation will be excluded from the interest limitation rules, such as:

  • the main home (if used to earn income)
  • business premises
  • farmland
  • various accommodation providers.

There are exemptions for land businesses, residential developments and new builds.


For more information please get in touch with your accountant OR click here



 

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