Interest Deductions On Rental Properties
From 1st October 2021, interest deductions on residential investment property acquired after 27 March 2021 will not be allowed. Interest on loans from properties acquired before 27 March 2021 can still be claimed as an expense. However, the amount you can claim will be reduced over the next 4 income years until it is completely phased out. This means that in the 2025-26 financial year and beyond, you will not be able to claim any interest expense as deductions against your income.
Property developers (who pay tax on the sale of property) will not be affected by this changed. They will still be able to claim interest as an expense.
Jason talks through all the changes and what it all means. Watch the video to learn more.
Bright-line Test Changes
The bright-line test means if you sell a residential property within a set period after acquiring it you will be required to pay income tax on any profit made through the property increasing in value. The Government has announced an extension of the bright-line test for residential properties (excluding new builds) from five to ten years. Inherited properties and those which have been the owner’s main home for the entire time they owned it will continue to be exempt from all bright-line tests.
New Home Builds
A new home is currently defined as a house that is acquired within a year of receiving their code compliance certificate. New builds acquired on or after 27 March 2021 would continue to be subject to a 5-year bright-line test.
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Changes to Rental Property Expenses & Bright-line Test
Interest Deductions On Rental Properties From 1st October 2021, interest deductions on residential investment property