As you know, on 23 March the Government announced some significant policy changes around housing. We wrote about it HERE
The media is having a field day talking about the impact and getting the immediate reactions of those affected. The simple truth is that the legislation has not been finalised. The bright-line test changes are going to be fairly simple changes and the only potential “gotcha” is still to be confirmed – how they are going to determine the values of properties when you move out of your home and make it an investment property, and then either sell it or move back in before selling it. Any increase or decrease in value for the time you are out of the property and renting it will be deemed taxable income.
The interest deductibility changes are far wider reaching. The statements are that property investment interest is no longer going to be tax deductible, and this will also affect commercial properties as well as residential. There were comments made in the initial announcement that new builds will be exempt and be allowed to claim interest deductibility in a hope to continue to encourage new builds. However, there is currently no supporting statements from IRD to back this. So for the interest deductibility policy changes this is a huge wait and see.
Based on this lack of detail, accountants and other experts are adopting a wait and see stance while the legislation is finalised, and quietly developing initiatives to support the variety of clients that will be affected by these changes.
Basically what we are saying here is that the new policies are not finalised yet, so don’t rush to make decisions without assessing what may happen. Your situation could yet change. Have a chat to us if you’re unsure of what your best move might be.