Property

Tax deductibility rules could be revealed next week

Developers and landlords who have been waiting with bated breath for clarification around the tax deductibility rules on mortgage interest should get some answers next week.

Friday, September 24th 2021

Expectations are that Revenue Minister David Parker will release details of what the removal of interest deductibility will look like early next week.

This is only days ahead of the change taking effect.

The new rules relating to interest deductibility, renamed the interest limitation rules are due to come into force on October 1.

The move announced by Finance Minister Grant Robertson in March aimed at cooling the rampant housing market took the property industry by surprise.

While the Government released a 138-page discussion document, it is yet to say exactly what the rules will entail.

And what a new build will look like to be exempt from the rule change and extension of the five-year bright-line test to 10 years. 

Only a single press release has been issued by Parker since the announcement of the tax change, which is to be phased in over four years.

When announcing the tax change Robertson said he believed it was a “very significant move”.

The Government has indicated the rule change will be made through a Supplementary Order Paper linked to the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Bill, which is still to go through the select committee process where public submissions can be made.

The final details of the change might not be known until the bill is passed possibly in March next year.

Labour labelled the change as closing a “tax loophole”, but National says it it isn’t and New Zealand’s tax professionals agree.

“This is a fundamental principle of tax policy, one that has existed for years until the Government decided to change it, says National’s shadow treasurer Andrew Bayly.

“Taxpayers have a right to know how the new interest limitation rules will work in practice: for example, what is the definition of a ‘new build’ and who will be entitled to the concession to deduct interest and for how long; and whether build-to-rent properties will be captured under the interest deductibility rules,” Bayly says.

National’s housing spokesperson Nicola Willis says National has previously questioned the Minister on the bright-line rules that came into force earlier this year.

“New Zealanders want to know how the new rules will affect parents who purchase a property for their child to rent while at university, or what will happen to farm owners who rent out cottages on their property to employees.

“Kiwis want clarification from the Government, but they aren’t getting any.

“The Government shouldn’t be introducing fundamental changes to the tax system without going through a proper select committee process and giving the public the chance to have their say, before finalising the legislation.

“On that basis National is calling on the Government to delay the rules coming into effect from October 1 to April 1, 2022.

“We believe the process is flawed and we’re not alone, many tax experts agree. The proposed decisions are unworkable and pay no heed to decades-old tax principles.

“National is committed to reversing the changes when in Government,” Willis says.

Comments

No comments yet

Heartland Bank - Online 6.69
SBS FirstHome Combo 6.74
Wairarapa Building Society 6.95
Unity 6.99
Co-operative Bank - First Home Special 7.04
ICBC 7.05
China Construction Bank 7.09
BNZ - Classic 7.24
ASB Bank 7.24
ANZ Special 7.24
TSB Special 7.24
Unity First Home Buyer special 6.45
Heartland Bank - Online 6.45
China Construction Bank 6.75
TSB Special 6.75
ICBC 6.75
ANZ Special 6.79
ASB Bank 6.79
AIA - Go Home Loans 6.79
Kiwibank Special 6.79
BNZ - Classic 6.79
Unity 6.79
Westpac Special 6.39
China Construction Bank 6.40
ICBC 6.49
SBS Bank Special 6.55
Kiwibank Special 6.55
BNZ - Classic 6.55
Co-operative Bank - Owner Occ 6.55
ASB Bank 6.55
AIA - Go Home Loans 6.55
TSB Special 6.59
Kainga Ora 6.99
SBS FirstHome Combo 6.19
AIA - Back My Build 6.19
ANZ Blueprint to Build 7.39
Credit Union Auckland 7.70
ICBC 7.85
Heartland Bank - Online 7.99
Pepper Money Essential 8.29
Co-operative Bank - Owner Occ 8.40
Co-operative Bank - Standard 8.40
First Credit Union Standard 8.50
Kiwibank 8.50

More Stories

Support for regulation

Monday, March 18th 2024

Support for regulation

REINZ has emphasised the need for property management regulation to Parliament’s Social Services and Community Committee.

A better investment market

Thursday, March 14th 2024

A better investment market

“Reinstatement of interest deductibility starting from the new tax year on 1 April brings property investors back in line with every other business in the country, where interest costs are a legitimate deductible expense," Tim Horsbrugh, New Zealand Property Investors Federation (NZPIF) executive committee member says.

[OPINION] Recessionary times

Thursday, March 14th 2024

[OPINION] Recessionary times

It is not the best out there for many businesses and property sector people. Sales are down across the board, our clients’ confidence is falling, and there is a lot of uncertainty.

Interest rate expectations: It’s not over yet

Thursday, March 07th 2024

Interest rate expectations: It’s not over yet

Most Kiwis think interest rate increases have peaked.