Up to date with the bright-line test and interest limitation rules?

Monday, 12 May 2025

A few helpful tips for completing your income tax return, due by 7 July (source: Tarawara Publishing)

Bright-line period?

 The bright-line period begins with the bright-line start date and ends with the bright-line end date.

• For property sold on or after 1 July 2024, the bright-line test looks at whether your bright-line end date for the property is within 2 years of your bright-line start date.
• For property sold before 1 July 2024, different timeframes apply.     Use our ‘Property tax decision tool’ and learn more about the bright-line test at: ird.govt.nz/bright-line

Interest limitation rules — what’s changing?

1 April 2024 to 31 March 2025

You can claim 80% of the interest you incurred. It does not matter when you purchased the property or drew down the loan.

 From 1 April 2025

Interest deductibility will be fully restored, and you will be able to claim 100% of the interest incurred.

Learn more about the changes to the interest limitation rules at: ird.govt.nz/property-interest-rules

Income tax returns are due by 7 July

• If a sale is taxable, then you will need to submit an income tax return, and if it is subject to the bright-line property rule then you will need to complete a Bright-line residential property sale information form – IR833. For more information, go to our website: ird.govt.nz/completing-your-income-tax-return-and-ir833
• If you are claiming interest expenses, you need to complete the interest fields in your income tax return as well as completing your Rental income schedule – IR3R (or Financial statements summary – IR10 if you file an IR4 or IR9 return). To find out if the interest limitation rules apply to you, go to ird.govt.nz/property-interest-rules. You will find the tool at the bottom of the page.   If you have any questions, we recommend you speak with a tax advisor before making any decisions.