Over the past few months, there have been quite a few tax changes that will have an impact on Landlords – If you’ve missed it see the round-up of the most important changes below.

1) Low-value assets

The low-value asset threshold was $5,000 for purchases made between 17 March 2020 and 16 March 2021. From 17 March 2021, the threshold has been permanently reduced to $1,000.

2) Changes to the Bright-line test

The bright-line test on residential rental properties will be extended to 10 years from 27 March 2021. New builds will remain at 5 years.

3) Changes to interest deductions on residential property income

The government has announced the removal of interest deductibility on loans for residential properties as an expense against their income. The new rule will be phased in over 4 years for existing properties and starts on 1 October 2021. For properties purchased after 27 March 2021, the new rule is effective from 1 October 2021. There will be an exemption for newly built homes.

4) New 39% individual tax rate

The personal tax rate has increased to 39% on income earned above $180,000 from 1 April 2021. The company tax rate and PIE tax rate remain at 28% and the trustee rate remains at 33%. There is now a significant gap between the top tax rate of the company and trustee rates – now is the time to talk to your tax advisor about any changes to your business structures.

5) Depreciation on buildings

Tax depreciation on commercial and industrial buildings has been re-introduced. The tax depreciation rate will be 1.5% straight line or 2% diminishing value.

6) Minimum wage changes 

From 1 April 2021, the adult minimum wage will increase from $18.90 to $20.00. The starting-out and training wages will increase from $15.12 to $16.00 per hour (80% of the adult minimum wage).

7) Increased disclosure requirements for Trusts

In addition to the introduction of the new Trusts Act 2019, which came into force on 30 January 2021, Inland Revenue will now require trusts to provide more information on their annual returns for the 2021-2022 income year onwards. The Commissioner can request the information from trusts for prior years back to the 2013-2014 tax year as appropriate. This allows for comparable information to be
gathered.

Please get advice from your tax advisor about these changes and your specific situation.