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Key Property Investor Changes

Bright-line test: This means that if you sell a residential property within a set period of time after acquiring it you’ll be required to pay income tax on any profit made through the property increasing in value. The existing bright-line period is 5 years, and the announcement extends this to 10 years for newly acquired residential investment property – except for newly built houses. This change encompasses all property acquired on or after 27 March 2021 – it is in effect now.

See here for official IRD advice

Removing interest deductibility: This change removes the ability for property owners to claim interest on loans used for residential properties as an expense against their income from those properties. This will apply from 1 October 2021.

Interest deductions on residential investment property acquired on or after 27 March 2021 will not be allowed from 1 October 2021. Interest on loans for properties acquired before 27

March 2021 can still be claimed as an expense. The amount investors can claim will be gradually reduced over the next 4 income years until it is completely phased out.

(NOTE: Consultation is underway to cover the exemptions for new build properties acquired as a residential investment property).

See here for official IRD advice

Income year                                       Percent of interest you can claim
1 April 2020–31 March 2021100%
1 April 2021–31 March 20221 April 2021 – 30 September 2021 = 100%
(transitional year)1 October 2021 to 31 March 2022 = 75%
1 April 2022–31 March 202375%
1 April 2023–31 March 202450%
1 April 2024–31 March 202525%
From 1 April 2025 onwards0%

First Home Grants & Loans: These changes will impact the First Home Grants and First Home Loans available and will come into effect on 1 April 2021, and are intended to assist more New Zealanders to purchase a first home.

It includes lifting the existing house price caps for both new and existing properties for buyers to qualify for a grant and raising the income caps for single people and more than two people, allowing more people to access these products. The income cap for a single person will be raised to $95,000, and for two or more people it will be $150,000.

See here for official details

Housing Acceleration Fund: There are a number of significant components to the Government’s announcement which are designed to help speed up and expand the breadth of housing delivery to all New Zealanders. While these may not have such a direct impact on investors like the other components outlined above, they are part of the announcement and are important to understand. These include:

  • Creation of an infrastructure fund to unlock a mix of private sector led and Government led developments – i.e. encourage more homes to be built
  • Additional funding for the Government’s Land for Housing Programme to accelerate development of vacant or underutilised Crown owned land
  • A Kāinga Ora Land Programme for strategic land purchases to increase the pace, scale and mix of housing developments (including more affordable housing).

For full details on the added components of this announcement, see the links below: