The 2024 Government Budget has brought some major changes that impact investment properties in New Zealand. If you're an investment property owner or thinking about buying one, it’s essential to get up to speed with these updates. Understanding them will help you make the most of your property and stay on top of the latest rules. Here’s a quick rundown of what’s changed and what it means for you.
How Will the Reinstatement of Mortgage Interest Deductibility Impact Investment Property Owners?
The return of mortgage interest deductibility, effective from 1 April 2024, marks a pivotal change for investment property owners. Here’s how it impacts you:
Tax Benefits: Great news! You can now deduct mortgage interest from the income you earn on your investment properties, which could significantly lower your tax bill. If you own several properties, this could lead to some impressive savings. It’s a fantastic opportunity to keep more of your hard-earned money!
Improved Cash Flow: Lower tax obligations may enhance your cash flow, allowing for reinvestment property acquisitions.
Phased Reinstatement: For properties purchased before 27 March 2021, you can claim 50% of mortgage interest for the 2023/24 financial year. For properties bought after this date, the deduction was initially zero but will increase to 80% in the 2024/25 financial year and 100% by 2025/26.
Learn more on what you can claim as deduction on your investment property income
Are No-Cause Evictions Being Restored for Investment Property Owners?
Investment property owners from early 2025 will be able to end tenancies without having to provide a reason, a shift from the previous rules that required justification. While this change simplifies managing your investment property, it’s important to consider:
For Landlords: This flexibility makes managing tenants a lot smoother and helps avoid long disputes. Plus, it might open the door for landlords to consider tenants who might have had some bumps in their rental history.
For Tenants: Increased tenant security becomes crucial as tenancies can be ended with less notice and no specific cause. Building a good relationship with your landlord can mitigate some of this uncertainty.
What Are the Changes to Notice Periods for Selling or Renovating Investment Properties?
Starting early 2025, landlords will need to provide 42 days' notice (down from 90 days) if they plan to sell or renovate their investment property. This change simplifies property transitions and could affect:
Market Dynamics: Faster notice periods may enable quicker property sales or renovations, potentially impacting rental availability and market competition.
What Does the Introduction of Pet Bonds Mean for Your Investment Property?
The new requirement for pet bonds, effective from early 2025, aims to safeguard landlords against potential pet-related damages. Here’s what you need to know:
For Tenants: A pet bond is an additional deposit on top of your regular rental bond. Don’t worry—it's refundable as long as there’s no damage caused by your furry friend
For Landlords: This offers financial protection against pet damages and could make your investment property more attractive to tenants with pets.
How Will the Revised Bright-Line Property Rule Affect Your Investment Property?
Starting 1 July 2024, the bright-line test, which taxes gains from selling property, has been reduced to 2 years. This change impacts:
Investment Strategy: If you sell an investment property within 2 years of buying it, you’ll now face capital gains tax. This could have a big impact on your short-term investment plans, so it’s something to keep in mind when making decisions.
How Will the New KiwiSaver Rental Bond Option Impact Investment Property Owners and Younger Tenants?
Younger tenants (under 30) can now use KiwiSaver funds for rental bonds, with the bond amount being returned to their KiwiSaver accounts at the end of the tenancy. This change provides:
For Tenants: Easier access to rental accommodation, though it’s important to be aware that using KiwiSaver funds might affect long-term retirement savings due to lost investment growth.
For Landlords: There’s now a new option to help tenants who don’t have a lot of cash upfront. This could broaden the range of potential renters for your investment property, giving you more choices when finding the right tenant.
What Does Ending Automatic Fixed-Term Tenancy Rollovers Mean for Your Investment Property?
Fixed-term tenancies will no longer automatically convert to periodic tenancies. This change allows:
For Landlords: Greater control over lease terms and easier management of tenancy agreements.
For Tenants: Active engagement in renewal discussions is necessary, promoting more proactive leasing management.
How Do Zoning Reforms Impact Investment Property and Affordable Housing?
Zoning reforms aim to address housing shortages and affordability but can impact property values and development opportunities:
Increased Property Values: Rezoning for higher density can raise property values and development prospects.
Regulatory Challenges: New compliance requirements may affect property management and development plans.
The 2024 Government Budget brings some exciting opportunities and challenges for property owners in New Zealand. With new tax benefits like mortgage interest deductibility and changes to tenancy laws, these updates could make a big difference in how you manage your properties and plan your investments.
To get personalised advice on how these changes might impact your investments or to make sure you’re staying compliant with the latest rules, reach out to Every Cent Accounts. Contact us today to chat about how these new regulations could affect your property and to make sure you’re ready for what’s ahead.