From 2024, significant changes are on the horizon for New Zealand's property investment sector, particularly concerning interest deductibility rules and the Bright-Line Test. Whether you currently own an investment property or are considering purchasing one soon, it's crucial to take note of the following details and understand how these changes might impact you.
Restored Interest Deductibility for Property Investors
The New Zealand government's plan to gradually restore interest deductibility for property investors signals a major shift aimed at strengthening the property investment sector:
- 2025 Financial Year: Deductibility will increase to 80%.
- 2026 Financial Year onward: Full deductibility will be reinstated, allowing 100% of interest costs to be deducted.
Rollback of the Bright-Line Test
Reverting to a Shorter Period: Reducing the Bright-Line Test from 10 years back to 2 years will significantly reshape the investment landscape and lower tax exposure for many investors. Properties acquired before July 2022 and sold after July 2024 are expected to be exempt from the Bright-Line Test.
What This Means for Investors
The 2024 amendments to New Zealand's investment property regulations offer a positive outlook for property investors. The phased increase in interest deductibility will enhance the cash flow of investment properties by reducing borrowing costs. Moreover, the rollback of the Bright-Line Test will decrease tax exposure for those considering selling an investment property after July 2024.
Consult with a Finsol Financial Adviser
If you've owned your own home for a while and are contemplating stepping into property investment, speaking with a Finsol Home Loan or Wealth Adviser can provide you with tailored advice and insights on how to grow your wealth through property.
This article is for informational purposes only and should not be considered as financial advice. It is always recommended to consult with a qualified financial professional before making any financial decisions based on your individual circumstances.
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