Far North Tax Professionals

Rental properties in New Zealand

If you own rental properties in New Zealand you need to know what you can and can’t claim.

Expenses you can claim

  • rates and insurance.
  • interest paid on money borrowed to finance your property.
  • agent’s fees and commission – relating to the rental of the property .
  • repairs and maintenance (unless they substantially improve the property).
  • reasonable motor vehicle and travel expenses
  • legal fees for arranging the mortgage or finance to buy the property (see also special note about legal fees).
  • mortgage repayment insurance.
  • accounting fees for the preparation of accounts.
  • depreciation on any chattels provided with a property.

Expenses you can’t claim  

Capital or private expenses can’t be deducted from your rental income.  Costs you incur to buy or increase the value of a capital asset are capital expenses.  Expenses unconnected with producing taxable income are private expenses.

Specifically, these expenses are non-deductible:

  • the purchase price of a property.
  • the repayment portion of any mortgage instalment.
  • interest on money which you borrow for a purpose other than financing the rental property, even if you use the rental property to secure such a loan.
  • the cost of additions to the property, and any work that go beyond repair or replacement – these are considered improvements.
  • real estate agent’s fees incurred as part of buying or selling the property.
  • depreciation on buildings (but ancillary services forming part of a building may be qualify – see special note).

Legal fees

From the 2009-10 income year legal fees for buying or selling a rental property can be deducted up to a limit of $10,000.  Before that year legal fees for buying or selling a property were not deductible.

Depreciation

From the 2012-13 income year depreciation on buildings is not deductible.  However, if the cost of certain services (examples: a service lift, or ducted air conditioning) can be identified, depreciation on those services is allowable.

 

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