Residential property changes – ring-fencing rental deductions

From the 2019-20 and later income years new ring-fencing rules apply to residential property deductions.

All deductions are now ring-fenced. If you own residential rental property, you can now only deduct expenses up to the amount of income you earn from the property for the year.

Any excess deductions (“rental losses”) will carry forward and must be added to other deductions for the property in a later year to offset in the year you derive residential income.

You can no longer use excess deductions from property to off-set other income, such as salary and wages.

The new rules apply to residential land you can claim deductions for. This will mainly be rental properties but can also include other residential land. The rules apply to individuals, partnerships, trusts, look-through companies and close companies. They apply to overseas as well as New Zealand properties.

If you own more than 1 rental property, you can choose whether to apply the ring-fencing rules across their prop

erty portfolio, or to apply them on a property-by-property basis. The portfolio basis will be the default option for applying the rules.

You can find more information on IRD's website at ird.govt.nz/ring-fencing

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