Government Announcement on Bright Line Test & other Tax Policies

Written by
MBS Advisors
Published on
March 23, 2021

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.

Bright Line Test: https://taxpolicy.ird.govt.nz/publications/2021/2021-other-fact-sheet-bright-line-test?fbclid=IwAR3CBCjg7I3mmlaxAgv8NcTmAJCbHWVW3duaYMPkZkDNTaOVJm29gmqkRQk

Interest Deductions: https://taxpolicy.ird.govt.nz/publications/2021/2021-other-fact-sheet-interest-deductions

Please give us a call if you wish to discuss how this might affect you.

Share this post
Blog

Explore our latest articles

Enjoy our latest news and blog posts

5 min read

Reopened for business during Level 3? Have you taken the right safety measures?

The COVID-19 outbreak has meant that the duty to minimise health and safety risks in your business has become harder. Now that lockdown measures have eased, what's your plan to manage risks whilst protecting your workers and customers as you restart your operations? At Alert Level 3, your business...
5 min read

What will a National-led government mean for your taxes?

We don’t yet know exactly how the new National-led coalition government will be formed. But we do know that National pledged to make some major changes to tax if it came into power. Here are some of the changes that could affect you: Tweaks...
5 min read

How much should you pay yourself?

As a business owner, how much should you pay yourself? It depends on how much your business can afford, market pay rates, and whether reinvestment could pay dividends. Being the boss means you get to make all the big decisions about your business – including how much to pay yourself...

Stay updated and sign up to our newsletter

By clicking Sign Up you're confirming that you agree with our Terms and Conditions.
Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.