There have been significant changes to the tax deductibility of interest paid to buy residential rental property.
Previously, subject to certain transitional rules, the interest on money borrowed to buy property where the sale and purchase agreement was dated after the 27 March 2021 was not tax deductible.
Limits were imposed on property bought before this date.
The current situation is:
- Year ended 31 March 2024 – 50% of interest is claimable on property where the sale and purchase agreement was dated on or before the 27 March 2021.
- Year ending 31 March 2025 – the cut-off date is dropped and interest deduction is partially allowed for all borrowing. The claim is limited to 80% of the interest incurred.
Year ending 31 March 2026 onwards – full tax deductibility of interest is restored
