TBH, I’m rather glad that March is over! In addition to the madness of tax year end, there was new legislation coming out of Parliament, new technical tax publications from Inland Revenue and Easter holidays thrown into the mix, for good measure.
April has been kinder, allowing me to catch up with the kids and put together a summary for you on some of the important changes.
– Alex
The bright-line test applies to tax a gain on residential land that is acquired and disposed of within a set period, unless it is a person’s main home. This period is 10 years for land with an older house on it, and five years for land with a new build on it.
From 1 July 2024, the bright-line test will be returning to a two-year period. Therefore, landowners who have owned their land for more than two years after 1 July 2024 should be able to sell their land without the bright-line test applying.
In addition, there has been a retrospective amendment to the main home exclusion to the pre-2021 bright-line test. This amendment allows landowners who couldn’t live in their home for 50% of the time they own it due to it being constructed, may now access the main home exclusion and claim back tax they have paid. We are already working on a few of these cases for clients.
Interest deductibility refers to the ability to reduce your taxable income by deducting interest payments from rental revenues. In March 2021, rules were introduced to phase-out interest deductions for existing rentals by 31 March 2025, or entirely deny deductions for rentals acquired after 27 March 2021.
From 1 April 2024, all affected landlords may claim 80% of their interest as a deduction, and 100% from 1 April 2025.
Income received by a trust, such as dividends or interest, may be allocated to a beneficiary and taxed at their marginal tax rate, or kept in the trust and taxed as trustee income (then later distributed to beneficiaries tax-free). The tax rate on trustee income used to be 33%, allowing trusts to have income taxed at a lower rate than if it were earnt by, or allocated to, an individual on a 39% tax rate.
From 1 April 2024 (for most trusts), trustee income will be taxed at 39%. There are exclusions to this for trusts earning less than $10,000 of taxable income, deceased estates, disabled beneficiary, and energy consumer trusts.
Deprecation was reinstated for commercial buildings during the 2021 tax year. This allowed landlords to claim deductions for the depreciation of commercial buildings at a rate of 2% (diminishing value) or 1.5% (straight-line).
From 1 April 2024 for most commercial landlords, building depreciation has been removed.
From 1 April 2024, GST will be collected from sale of accommodation, rideshare, and delivery services through digital platforms such as Airbnb and Uber. This is regardless of whether the supplier is registered for GST or not. Check out our earlier article for full details and working examples.
We have already come across some issues with the implementation of the rules and suggest that you get in touch if you have any questions around how they may apply to you.
As always, don’t hesitate to reach out if you’d like help to work through the implications of any of these changes.
Alex Cull, Tax Partner
[email protected]
If you’re reading this long after the published date, please get in touch to see if it’s still relevant.
