Kia ora, property enthusiasts! Welcome back to our blog series, where we delve into the world of property investment and management. Today, we bring you the eagerly awaited news: the government has officially confirmed changes to interest deductibility.

In our last blog, we discussed the potential restoration of interest deductibility on rental properties, as agreed upon by Act and National. Now, we have the concrete details – and while there’s some great news, it’s not quite everything some were hoping for.

Effective April 1st, 2024, landlords can now claim back 80% of interest costs on their rental properties. The aim is to grant landlords greater flexibility in offsetting their interest expenses against their taxable rental income. This significant increase provides much-needed relief for many landlords navigating financial constraints in the current climate.

That means that based on a mortgage of $800,000 with an interest rate of 6.85% – you could claim over $38,000 of interest as a legitimate expense against your rental income, come 1st April 2024. That’s a lot of savings when it comes to the tax man!

While this forward step is fantastic news, Act had floated the idea of making these changes retroactive for the current financial year. However, Act Leader David Seymour deemed it too complicated, stating, “To have gone to 60% retroactively would have complications probably not worth the amount of benefit it would have given.”

Nevertheless, these changes are a game-changer for property investors, resulting in reduced tax obligations and increased cash flow. With interest rates climbing and tax burdens mounting, this announcement couldn’t have come at a better time.

As mentioned in our last blog, it’s important to note that some people are still eligible for 100% interest deductibility. New builds – properties receiving their Code of Compliance Certificate (CCC) on or after March 27th, 2020 – can enjoy 100% interest deductibility for 20 years. However, this time frame will become with the new legislation from April 1st, 2025, as all investment properties will benefit from 100% interest deductibility being restored.

For those considering entering the property market, now presents an excellent opportunity to take the plunge.

As always, it’s advisable to consult with financial experts to maximize the benefits of these changes and navigate the property market effectively.

If you’re eager to explore property investment or seek guidance on optimizing your returns, don’t hesitate to reach out at hello@vertigro.co.nz. We’re pleased to offer a complimentary rental appraisal and assist you in getting started.

Stay tuned to our blog for further insights into the ever-evolving realm of rental property regulations. Together, let’s cultivate a rental market that’s equitable, transparent, and prosperous for all.

Until next time, happy investing!