Parliament

Gordon Campbell | Parliament TV | Parliament Today | Video | Questions Of the Day | Search

 

Details Of Interest Deductibility Rules Released

Hon Grant Robertson

Minister of Finance

Hon Dr Megan Woods

Minister of Housing

Hon David Parker

Minister of Revenue

The Government has released the draft legislation outlining the details of the policy limiting the deductibility of interest costs on residential property investments.

Finance Minister Grant Robertson said the interest limitation proposals, announced in March, aim to stem investor demand for existing residential properties. They do not affect the main family home or new builds.

“Earlier this year we extended the bright-line test from five years to 10 to help reduce the incentive to invest in housing over other types of assets.”

Early indications suggest that enthusiasm for existing residential investment properties might be waning.

“The detailed proposals we are releasing today will further level the playing field for existing homes in favour of first home buyers,” Grant Robertson said.

“Tax is neither the cause nor the solution to the housing problem, but it does have an influence, and this is part of the Government’s overall response.”

Revenue Minister David Parker said the proposals, including the way the new build exemption would be applied, had been subject to public consultation. The proposals would limit the availability of deductions for interest expenses incurred by residential property investors from 1 October 2021.

“As we made clear when we announced the policy in March, for existing residential investment property acquired on or after 27 March 2021 deductions for the cost of interest will no longer be allowed.

“Interest deductions on borrowings drawn down before 27 March 2021 for existing residential property acquired before this date would be phased out over the period between 1 October 2021 and 31 March 2025,” he said.

“We want to curb investors’ appetite for existing residential properties but also want to stimulate investment in new housing. That’s why we’re also proposing an exemption for property development and for new builds, allowing interest deductions in full.”

“The Government is committed to boosting the supply of new housing. The exemptions for new builds and for property development will ensure the interest limitation rules do not reduce the ongoing supply of new housing,” Housing Minister Megan Woods said.

A property that received its code compliance certificate on or after 27 March 2020 will be eligible to deduct interest for up to 20 years from the time the property’s code compliance certificate is issued. The exemption will apply to both the initial purchaser of the new build and any subsequent owner within the 20 year period.

Megan Woods said that the new build exemption also applied to purpose-built rentals.

“Purpose-built rentals are large residential developments designed for ongoing rental, rather than sale. This is an emerging area and one where we see real potential to meet gaps in our rental market. I am expecting further advice on purpose-built rentals in coming weeks and will report back to Cabinet on whether there should be an extension beyond the 20 year period for some or all of this sector,” Megan Woods said.

David Parker said that generally speaking, private residential investment properties capable of being used for long-term accommodation would be subject to the rules.

“So hotels for instance, would not be affected by these rules as they are set up to provide short-term, and not long-term accommodation. The owner-occupier of a house with flatmates would not be affected either,” he said.

To help people understand the interest limitation proposals, a set of information sheets are available at taxpolicy.ird.govt.nz.

The changes would be set out in a Supplementary Order Paper that will be considered by the Finance and Expenditure select committee for inclusion in the current taxation bill.

He said that the Supplementary Order Paper also contained two other proposals. These are to provide employers with another option for calculating fringe benefit tax, and to clarify the application of the business continuity test for carrying losses forward.

© Scoop Media

 
 
 
Parliament Headlines | Politics Headlines | Regional Headlines

Gordon Campbell: On The Perils Of Declaring Premature Victory


Sure enough, Saturday’s Vaxathon was a barrel of fun and a throwback not merely to the Telethons of the past. It also revived memories of those distant days of early 2020, when we were all carefully wiping down our groceries, not touching our faces, washing our hands for 20 seconds and responding to level four lockdowns by putting teddy bears in the window for the benefit of the little kids walking by in their family bubbles. Those were the days, when the Team of Five Million felt like a real, organic thing... More>>

RNZ: Prime Minister Jacinda Ardern announces Cabinet decision on Covid-19 alert levels


Northland will move to level 2 at 11.59pm on 19 October. Waikato will be held at level 3, to be reviewed on Friday. Auckland will remain in level 3 with current restrictions for another two weeks... More>>

ALSO:




 
 


Government: Red Tape Cut To Boost Housing Supply
First home buyers are set to benefit from changes to planning rules being advanced by the Government and the National Party that will enable more medium density housing and cut red tape that acts as a barrier to development... More>>

ALSO:

Economy: Inflation highest in over a decade
The consumers price index rose 2.2 percent in the September 2021 quarter, the biggest quarterly movement since a 2.3 percent rise in the December 2010 quarter, Stats NZ said today. Excluding quarters impacted by increases to GST rates, the September quarter movement was the highest since the June 1987 quarter... More>>

ALSO:


Government: New Zealand Increases Climate Aid Contribution

The Government is making a four-fold increase in the support it provides to countries most vulnerable to the climate emergency, Prime Minister Jacinda Ardern and Climate Change Minister James Shaw announced today... More>>



Pay Cheque To Pay Cheque: Half A Million New Zealanders Have No Savings
New findings from the Consumer NZ sentiment tracker found that 15% of New Zealanders had no savings, and a further 27% were anxious about their level of savings and would like to have more tucked away... More>>


Government: Mandatory Vaccination For Two Workforces

Large parts of two workforces critical to preventing the spread of COVID-19 will be required to be vaccinated, COVID-19 Response Minister Chris Hipkins said today. “Our education and health and disability workforces have done an incredible job throughout this pandemic to keep themselves and people safe,” Chris Hipkins said.... More>>


Green Party: Deeply Concerned Space Launches May Be Breaching Nuclear-free Laws

The Green Party is deeply concerned that space launches by Rocket Lab may be breaching nuclear-free laws, given our long-standing position as a signatory of the Nuclear Non-Proliferation Treaty... More>>


 
 
 
 
 
 

LATEST HEADLINES

  • PARLIAMENT
  • POLITICS
  • REGIONAL
 
 

InfoPages News Channels