- January 11, 2022
- Posted by: Angela
- Category: GST, Loan repayments
In March 2021 the Government announced changes to the bright-line test and interest deductibility for residential properties.
Following the release of a discussion document in June, there has still been significant uncertainty regarding the specific details of how the new rules will apply. However, the government has now provided clarity through the release of draft legislation on 28
September 2021.
For the purposes of the legislation, a new term has been coined – “disallowed residential property” (DRP), which refers to those properties for which interest deductibility will be affected. DRP’s purchased before 27 March 2021 will have their interest deductibility phased out between 1 October 2021 and 31 March 2025, while those purchased on or after 27 March 2021 will be wholly denied the deduction from 1 October 2021.
However, if a property has had a code compliance certificate (CCC) issued on or after 27 March 2020 it will qualify as a ‘new build’, in which case interest will remain deductible. The date of 27 March 2020 is one year earlier than expected. Properties that qualify as social, emergency, transitional or council housing will be excluded from the interest limitation rules, regardless of their new build status.
For more information on ‘Clarity for Property Investors paper’ please go to our Latest News page or contact us.