As we outlined in our previous blog article, in March this year the government announced a raft of tax changes aimed at the housing market. The announcement in March covered the government’s policy intent and did not have many specifics.

Details around the deductibility of interest was announced this week, which we will go through in this blog. Here’s a recap of what was announced in March this year.


The current bright-line period will be extended to 10 years for properties acquired on or after 27 March 2021, except for new builds.

  • The existing “main home” exemption will also be amended to reflect the split between personal and rental use.
  • Interest costs will no longer be deductible for income tax purposes for properties acquired after 27 March 2021 (interest limitation rule). An exemption for new builds will also be introduced.
  • For existing properties, interest deductions will be phased out over four years.

New Builds

The interest limitation rule will not apply to a new build for a period of 20 years, regardless of the owner.

For the purposes of the interest limitation rules, a “New Build” will be defined as a self-contained residence that receives a CCC (Code of Compliance Certificate) on or after 27 March 2020.

In other words, interest costs incurred on residential properties acquired after 27 March 2021 will still be deductible for tax purposes if that property received a CCC on or after 27 March 2020, for a period of 20 years from CCC date.

The exemption will apply to anyone who owns the new build within this 20 year period, and the timing of the exemption is not reset when the property is sold.

Things for you to consider:

Firstly, if you are going to rely on this exemption, make sure you physically sight the CCC date on an official council document (most likely the LIM report). Don’t rely on word of mouth.

Secondly, some so called “old” houses may still qualify as new builds. It is not uncommon for old dwellings to be moved to a new piece of land, where a new CCC would be granted. If that is the case, then it could qualify as a new build.

Thirdly, this 20 year period will lapse at different dates for different properties, as each property will have a different CCC date.

Is interest costs permanently denied?  

Maybe not. Previously denied interest deductions may be available when residential property is sold if the sale is taxable, although the deduction may be limited to the gain on sale.

For example, if you sold within the bright-line period and the gains were taxable, the previously denied interest deduction could be used to offset against the taxable gain.

Things for you to consider

Even though the interest deductions might be initially denied, your accountant should still keep track of the interest costs, as you might be able to use them one day.

Refinancing, Variable Loans, Revolving Facility

Refinancing of pre-27 March 2021 borrowing will be eligible for the phasing out of interest deductions over time. This will be limited to the loan balance as at 27 March 2021.

If the amount outstanding is higher than the amount outstanding as at 27 March 2021, only interest on the amount outstanding on 27 March 2021 will be deductible under the phased approach. Interest on the remainder of the amount outstanding will be non-deductible.

Properties not affected by interest limitation rule

You will still be able to deduct interest for some properties. In particular, main homes are not affected by these rules. If you rent out part of your main home to flat mates or boarders, you will be able to deduct some interest against that income. For a list of other properties that are not affected, please feel free to contact us.


Although these rules have not been turned into law yet, they will retrospectively apply from 1 October 2021. There is much complexity in these proposed rules, and we have only touched the surface of what will become law. Again, please contact us if you have any questions regarding these changes.

In addition to the interest limitation rules, the government has also previously enacted changes to the bright-line rules and the main home exemption, which we will cover in our next blog. Stay tuned.

Written by Gordon Tian

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