Changes to Tax Deductibility on Interest Expenses
- If you acquire a residential investment property before 27 March 2021 but your settlement doesn’t take place and your loan isn’t drawn down until after 27 March 2021, you can still deduct interest using the 4-year phase out process described above. However, if you draw down additional funds in relation to the investment property after 27 March 2021, i.e. not for the settlement, interest on that portion of the loan cannot be claimed as an expense from 1 October 2021 onwards.
- If you have made an offer on a property before 23 March 2021 but the offer is only accepted after 27 March 2021 and you cannot withdraw your offer for example in a tender, you can still deduct interest using the 4-year phase out process.
- Where residential loans are used for business use by business owners, property developers or builders, interest expenses can be deducted.
Keep an eye out for any IRD updates on this matter and ensure you consider your position carefully when looking into investing in residential properties. It is prudent to speak with your accountant and lawyer before investing in the housing market whether it be a new build, existing property or even your main home.