Consultation on the exemption of new constructions from the proposed tax rules

The government confirmed today that new construction will be exempt from the planned changes in the tax treatment of residential investment properties.

Public consultation is now open on the details of the proposals, which end the interest deductions claimed for residential investment property other than new construction.

“The government’s goal is to encourage more sustainable house prices, by curbing investor demand for existing housing stock to improve affordability for first-time home buyers. The proposals we are releasing today will help achieve this goal, ”said Grant Robertson.

“It’s part of the government’s desire to cool the housing market. A more sustainable housing market helps more first-time buyers to move into their own homes, but also protects our recovering economy. So we all benefit from it.

David Parker said: “The proposal to exempt real estate development and new construction should help boost supply by channeling investment towards increasing housing stock and away from direct competition with first-time buyers and owner-occupiers. for the existing housing stock. “

“This consultation is focused on finalizing the detailed rule design. The proposals will not affect the primary residence.

As a general rule, it is proposed that the residential property be considered new construction if it is a self-contained dwelling (with its own kitchen and bathroom, and which has received a certificate of compliance with the code). The government is also examining whether subsequent owners should also be exempt from changes in interest and for how long that exemption could last.

The consultation ends on July 12, 2021. The measures will be presented to Parliament later this year but will apply from October 1, 2021.

Discussion paper Design of the Interest Limitation Rule and Additional Demarcation Rules will be available at
https://taxpolicy.ird.govt.nz/publications/2021/2021-dd-interest-limitation-and-bright-line-rules
and the summary sheets attached to taxpolicy.ird.govt.nz.

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