PHOTO: Prime Minister Jacinda Ardern. Getty Images
New build properties and purpose-built rentals will get a two decade exemption in a tax change meant to deter property investment, described as a “tax grab” by the Opposition.
A property that received its code compliance certificate after March 27 this year will be eligible to deduct interest for up to 20 years from the time the property’s code compliance certificate was issued.
The exemption will apply to both the initial purchaser of the new build and any subsequent owner within the 20 year period. It will also be applied to purpose-built rentals
The Government announced in March a raft of changes to try and bring down property prices, including removing tax deductions on interest costs for rental properties, because property investors made up the biggest share of buyers in the housing market.
To further reduce the incentive to invest in property, the Government increased the bright-line test – income tax paid on any gains from residential property – from five years to 10 years.
The interest deductibility rules come into effect on Friday and the Government has been criticised for releasing details of the policy exemptions only a few days prior.
“The process from Labour has been shoddy to say the least,” said ACT’s housing spokesperson Brooke van Velden.
“Introducing details just days before this comes into effect is poor policymaking in the extreme. Once again Labour has caused uncertainty for New Zealanders and reverted to a new tax – the only policy solution it knows.”
A dumping of documents related to Budget 2021 in August showed Treasury predicted the change could generate tax revenue of up to $800 million or more.
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