New builds could retain interest deductibility for 20 years

From October 1, new builds could retain interest deductibility for 20 years. On Tuesday the government released details around the potential new tax rules affecting residential property investors. These details are in line with what they announced on March 23.

"In general, the new “phasing out” interest limitation rules apply to all residential property investors who have purchased a property with the following characteristics:

The property’s code of compliance certificate (“CCC”) was issued prior to 27 March 2020; and the property was purchased before 27 March 2021," explained Justin Wong Head of Business Advisory at Become Wealth.

What this means to investors is that if they have a new build that received code of compliance before March 2020, it would be considered an existing investment, and then be subject to the phasing in of tax charged on rent received, in the same fashion that any existing property purchased post 27th March 2021 has. This can change the cash flow and affordability for landlords who have these kinds of properties.

In great news for adding to healthy, warm, low maintenance housing stock, new builds are exempt for 20 years from this taxation. A new build (built post-March 2020) has the ability to deduct interest cost (what you pay in bank interest on the loan) against the profit of rent received. This can again change cash flow for investors, often substantially lowering the tax bill at the end of the year.

The government has indicated that this 20-year exemption for new builds will be based on when the code of compliance was issued, and the benefits will then transfer from owner to owner in that 20 year period.

Are you wondering if your current portfolio is structured effectively to handle these changes, or are you interested in how new builds can help grow wealth and benefit your investment cash flows?

 Come chat with our team of financial advisers today.