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Are granny flat construction costs tax deductible?

20 August 2018

Photo: Georgie and Rhys's place, New Plymouth, 8 November 2006 by Phillip Capper

Building a granny flat in the back garden as an extra room that can be rented out seems like a no-brainer. But can construction costs associated with this build be claimed on tax?

Short answer is no. Unfortunately, all costs associated with the construction of an asset (granny flat in this instance) are capital costs. This includes (but not limited to) architectural fees, council consent forms and payments to builders for materials and labour.

Holding costs like rates and interest are typically tax deductable through the construction phase.

If ever in doubt, please talk to your tax accountant to discuss your specific situation.

The information contained in this article is exclusively for promotional purposes. It does not in any way constitute legal advice and should not be relied upon as the basis for any legal action or contractual dealings. The information is not, and does not attempt to be, a comprehensive account of the relevant law in New Zealand. If you require legal advice you should seek independent legal counsel. does not accept any liability that may arise from the use of this information.

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