The Government has confirmed that they intend that new builds will be exempt from the proposed new legislation for removing deductions for interest on residential rental properties. However, this is subject to Parliament passing the proposal into law.
What is Classified as a New Build?
A new build will be defined as a self-contained residence with a CCC confirming it was added to the land on or after 27 March 2020. It will include a self-contained residence purchased off plans that will receive a CCC on or after 27 March 2020. A new build can consist of modular and relocated homes, as it does not have to be made of new materials or be constructed onsite. It also includes converting an existing dwelling into multiple new dwellings, as well as converting a commercial building into residential dwellings.
The new build exemption means that owners can deduct interest from the date it is acquired (if it already has a CCC or is purchased off plans), or the date it receives its CCC.
When Does the New Build Exemption Expire?
The new build exemption will expire 20 years after it receives its CCC or when it ceases to be on the land, such as in the case of demolition or removal.
The 20-year exemption period is fixed and therefore does not reset in the event that the new build is sold.
Note that special rules will apply for new builds that have significant delays in receiving their CCC.
Other Exempt Properties
In addition to new builds, owners of these types of properties will also still be permitted to claim deductions for interest:
- Properties used as business premises, such as shops or offices
- A portion of the main home used to earn income, such as a boarder
- Houses on farmland
- Bed and breakfasts where the owner resides on the property
- Hotels, motels, campgrounds, hostels
- Employee accommodation, student accommodation
If you have questions regarding the proposed new legislation affecting residential rental properties, please contact us – we’re here to help.