As we approach 2024, the real estate and rental landscape in New Zealand is poised for change, driven by recent political shifts. If you’re looking to invest in a rental property, the new year may be a good time to make your move. To ensure you are best prepared to take action when the time is right, we’re looking at what you should be doing to get your ducks in a row.
Understanding the political landscape
With a new Government recently elected, it’s essential to be aware of policy shifts that may impact current or prospective property investors. Two significant changes on the horizon are alterations to interest deductibility and potential changes to the bright-line test.
Interest deductibility rules will be changing in the new year, with the ability to deduct mortgage interest as a claimable expense being restored once again. The coalition government has adopted a phase-out of the current rules over the next three years. Interest deductibility will be restored to 60% in the 2023/2024 financial year, 80% in 2024/2025, and completely restored to 100% in 2025/2026.
Bright line test reduction
While nothing is confirmed, National has also proposed a reduction of the bright-line test, meaning that the length of time that residential property sale profits are subject to tax may be reduced. As the details are still evolving, it’s advised to stay updated with the latest political developments so you can be informed on how this will affect you.
If you want to be best prepared for when the time is right to take up a rental investment opportunity, here are some things you should be thinking about now to ensure you are ready.
Before diving into the real estate market, conduct a thorough financial assessment. SBA can help you evaluate your current financial position, assess your borrowing capacity, and determine the feasibility of your investment plans.
Given the coming changes in interest deductibility, proactive tax planning is essential. Get in touch with us to explore tax-efficient strategies and identify opportunities to optimise your tax position within the evolving regulatory framework.
Stay on the right side of the law by seeking legal advice. A potential reduction in the bright-line test may have legal implications for your property transactions. Consult with legal professionals to ensure your investment strategy aligns with the updated regulations.
In the ever-changing landscape of property investment, being well-informed and adaptable is key to success. At SBA, we are committed to helping you navigate the complexities of the market, considering the potential political changes on the horizon. By getting your ducks in a row and proactively adjusting your strategy, you can position yourself for a successful and sustainable rental property investment opportunity in the year ahead.
If you need help setting up your rental property structure or help managing your accounting talk to our team.