Do you own a residential rental property?
The Government has passed legislation around the removal of tax deductions on loan interest on rental properties. Previously, interest payments could be claimed as a business expense and taxed accordingly.
Backdated from 1 October 2021, the following applies:
- Residential rental property purchased on or after 27 March 2021, interest cannot be claimed as an expense from 1 October 2021, unless an exclusion or exemption applies.
- For 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 table below). Interest deductions for any new loans drawn down on or after 27 March 2021 is not allowed from 1 October 2021 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
To find out more detail on the exemptions, click here.
There are also exclusions for land businesses, residential developments and new builds.
Useful guides to exemptions and exclusions:
Exemptions for property development and new builds, click here
Changes to tax returns
From 2022 income tax year onwards, you will need to take the new interest limitations into consideration when completing your income tax return.
Read more about these changes
Please click here to read more about these changes.
Contact us if you want to understand how these changes may affect you.