Relief for Residential Investors In Large Scale Remedial Works
Owners may be aware the IRD has reviewed a large number of elements of the tax legislation. Included and focussed on a policy decision to encourage growth in NZ’s housing stock is the issue of purchasers of new builds being exempt from the removal of interest deductions on borrowings on residential investment properties.
Following a comprehensive discussion paper the first reading of the Bill passed through Parliament and moved to Select Committee stage. BBCL and others made submissions suggesting the new-build exemption should be extended to expenditure on existing dwellings needing major repairs (essentially leaky buildings and earthquake impacted buildings).
BBCL Director, Craig Leishman, addressed the Select Committee, over the logic of increasing the exemption to include existing complexes whereby major remedial works serves to increase the life of housing stock and to improve the quality of such stock.
Craig submitted that by encouraging and supporting an exemption for significant remedial repairs this would prevent existing dwellings from falling out of the current housing stock. If not included, housing suitable for refurbishment may be seen as a commodity and demolish and rebuild would result simply because of the tax settings.
BBCL is pleased to note its submissions were well received and it is now proposed the exemption for new-builds will be extended to include leaky buildings that have been reclad (at least 75% of the dwelling) and with a code of compliance issued on or after 27 March 2020.
The new-build exemption will also apply to many earthquake rating impacted buildings and permit interest deductions for 20 years. The exemption over interest claims are transferrable to subsequent purchasers during the 20 year period.
At this stage it is unclear when the next reading of the Bill will occur. It does look extremely likely investors borrowing to carry out significant repairs will enjoy interest deduction relief on residential units which undergo recladding.
Link to full reports below:
Please let us know if you would like any further advice on the details of the proposals.
BBCL thanks supporting submitters PWC and HA law who supported BBCL’s submissions.
