Tax Tips Residential Rental Property

There are two main types of residential rental property in NZ.

• Residential rental on investment property
• Holiday home residential rental (mixed-use asset rules apply)

This tax tip covers long-term residential rental on an investment property.

Long-term residential rental is exempt from GST. This means that you do not need to register for GST, file or charge GST on your rental income and expenses.
Income – any rental income received

Expenses you can claim against your rental property

• Insurance
• Rates
• Management fees for property managers
• Accountants for preparing tax returns, tax advice etc.
• Valuation for a mortgage
• Legal action to recover unpaid rent
• Costs to evict a tenant
• Mortgage repayment insurance
• Depreciation on capital items such as furniture & fittings
• Travel or motor vehicle (mileage) expenses for property inspections and to carry out repairs & maintenance
• Repairs & maintenance (please note, significant repairs & maintenance following the purchase of a rental property are considered to be capital in nature and therefore are generally not deductible)
• Legal fees for the purchase of a rental property (provided the total legal fees for the year is below $10,000)
• Interest on the mortgage of the property

As of the 2020 income tax year (1 April 2019 – 31 March 2020) there are new residential rental deduction rules (ring-fencing rules).

If your rental expenses exceed your rental income, you will have to carry forward any excess deductions for use in a future year when your residential properties makes a profit. You cannot use the rental deductions against any other income such as salary and wages.

Note – These tax tips are of a generic nature. If you require clarification or assistance with the application to your business, we are happy to assist.

Contact us today to discuss your rental tax obligations.

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