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Author: Claire Bryant

Changes to Residential Investment Properties

September 29

Last year the government announced proposed changes to interest deductibility in relation to residential investment properties.

The proposal is that from 1 October 2021, interest would no longer be deductible for residential property acquired on or after 27 March 2021. For properties acquired before 27 March 2021, generally, the investors’ ability to deduct interest will be phased out between 1 October 2021 and 31 March 2025.

On Tuesday 28 September 2021, the government provided further clarification on the types of properties this would apply to and the possible exclusions.

In summary, the exclusions proposed include:

  • an exclusion for the main family home,
  • exclusions for several types of residential property (this includes hospitals, retirement homes, hotels, and the like) and,
  • exemptions for new builds and for property development.

It is this last exemption regarding new builds that has been defined further. A new build will generally be defined as a self-contained residence that receives a Code of Compliance Certificate (CCC) confirming the residence was added to the land on or after 27 March 2020. It will also include a self-contained residence acquired off the plans that will receive its CCC on or after 27 March 2020 confirming it has been added to the land.

It is important to note the expiry of exemption for new builds has also been clarified, and the exemption will expire 20 years after the CCC is received for the new build. This allows the ‘new’ status to remain regardless of who owns the property over this 20-year period.

Interesting to note that previously denied interest deductions may be available when a residential property is sold, if the sale is taxable, although the deduction may be limited to the gain on the sale.

If you have any questions about the above, please feel free to contact us.

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