Rollover Relief and Interest Limitation Law

Anna
Anna
5 April 2022

One of the most controversial tax policies, phasing out interest deductibility for residential properties, is finally becoming law.

The Tax Bill passed its third reading and now awaits the Royal assent, a formality at this stage.

In summary, no interest may be claimed for residential investment properties acquired on or after 27 March 2021. Landlords with existing properties purchased before this date are subject to phased-out deductions:

  • 75% of the interest claimable for the 2022/2023 tax year,
  • 50% claimable for the 2023/2024 tax year,
  • 25% claimable for the 2024/2025 tax year; and
  • no deduction at all for interest incurred from 1 April 2025 onwards.

More on these rules here

New Rollover Relief Rules

A ray of sunshine amidst the chaos is the new rollover relief rules. These rules provide tax concessions to landlords restructuring their property portfolios, where the legal ownership of the property changes, but the effective ownership remains the same. The rollover relief rules will allow one property to be transferred from one party to another without triggering interest limitation rules and restarting the 10-year brightline rule.

The common scenarios these rules will be applicable in are property transfers between individuals and family trusts, transfers between trusts, and to and from look-through companies.

The rollover relief provisions apply to transfers made on or after 1 April 2022. However, there are exemptions, so please talk to your accountant if you're thinking of re-structure and see if these new rules could be of use to you.

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. myRent.co.nz does not accept any liability that may arise from the use of this information.

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