The Government has announced significant changes to the bright line test along with the addition of other tax policies that will have an impact on the tax obligations of residential property owners. These changes apply to properties that are acquired on or after 27 March 2021, however exemptions apply to properties where offers were made on or before 23 March 2021.
Bright Line Test: This test is being extended to 10 years from 5 years, however, the test will remain at 5 years for newly built residential properties. Along with this, residential property owners could be liable for taxation on a portion of their capital gain if they did not occupy the property for the entire time they owned it.
Interest Deductibility: The interest expense on residential investment properties purchased on or after 27 March 2021 will not be deductible for tax purposes from 1 October 2021, with an exemption for newly built homes. The amount of interest that can be claimed on existing residential investment properties will be reducing over the next 4 years, with interest deductibility being 0% by the 2026 financial year.
Click on the below links for the complete details of the newly announced policy changes.
Please give us a call if you wish to discuss how this might affect you.