The Government made some important announcements yesterday morning (23/03/2021) to help try and address the supply and demand for residential properties. They include:
1. THE BRIGHTLINE TEST FOR HOUSES WILL INCREASE FROM 5-10 YEARS.
The bright-line test is increasing from 5 to 10 years from 27th of March 2021, meaning anyone who buys and sells a residential property within 10 years will need to pay income tax of up to 39 percent on any profit made.
The old 5 year rule is going to stay in place for now for any new builds, and family homes / inherited property will continue to be exempt from the bright-line Test.
You can read more about this here.
2. PROPOSED CHANGES TO TAX DEDUCTIBLE-INTEREST ON HOME LOANS
For investment properties acquired on or after 27th of March 2021, you will no longer be able to claim a tax deduction for interest expenses against your rental income. This legislation will apply from 1 October 2020.
If you acquired an investment property before 27th of March you will still be able to claim a tax deduction for interest on loans as an expense, however the amount you can claim will reduce over the next 4 income years until it is completely phased out.
Property Developers (who pay tax on the sale of property) will not be affected by this change and ‘new build’ properties may be exempt from these changes subject to consultation on the changes.
You can read more about this here.
For more announcements and more detailed information you can refer to the Government’s media statement.
Please feel free to contact us on 03 374 9393 to discuss how these changes may affect you.