Commonly Asked Question

The Government has removed the ability to deduct interest as an expense from income arising from residential rental properties. This was in response to the pressure on house prices and the ‘intention’ is to make it easier for first home buyers to own their own home (we would argue it has and will continue to push up rents rapidly, impacting those trying to save for their first home).

The rule provides for a phasing out of the interest claimable:

• For residential rental property acquired on or after 27 March 2021 interest will not be able to be deducted from 1 October 2021.
  
  

• For properties acquired before 27 March 2021 the ability to deduct interest will be phased out over 4 years from 1 October 2021 as follows:
  (% Claimable)
  1 April 2021 to 30TH Sept 2021 100%
  1 October 2021 to 31 March 2022 75%
  1 April 2022 to 31 March 2023 75%
  1 April 2023 to 31 March 2024 50%
  1 April 2024 to 31 March 2025 25%
  Thereafter 0%

The rules apply to Companies that have residential property investments also. There are some important exemptions and special cases e.g. new builds.

We recommend you seek accounting advice to discuss your induvial situation.