10 May 2019
In effort to level the playing field between property investors and home buyers, a new law ring-fencing rental losses looks set to come into effect retrospectively on 1 April 2019. Here’s a summary of what the new legislation involves:
Rental losses can’t be offset against other income
The proposals mean that for rental properties that make losses, owners will no longer be able to offset those losses against other sources of income such as salary or wages.
However, owners who incur losses on their rental property will be able to carry these forward and use them against future income or profits from that property. Owners with more than one property can also use those losses to offset any income from other rental properties.
What property is subject to these rules?
The proposals apply to ‘residential rental property’:
- Land that has a dwelling on it
- Land on which the owner has arranged to build a dwelling, or
- Bare land that may be used to build a dwelling under the relevant operative district plan
What property is NOT subject to these rules?
The proposals do not apply to a property that is used predominantly as business premises, or farmland.
Our Recommendation
The proposed new rules are horribly complicated in the fine detail and have some way to go before they are actually law. We will still stay in touch with you about it. In the meantime, don’t hesitate to contact us if you:
- Want to discuss likely scenarios for your current rental investments
- Are thinking about buying or selling rental property
- Will be arranging finance or refinancing your rental property