Residential property changes – ring-fencing rental losses
From the 2019-20 income year onward, new rules apply to deductions claimed for residential properties. Residential property deductions will now be ring-fenced, meaning that they can only be used to offset income from residential property. This means that the residential property deductions you claim for the year cannot exceed the amount of income you earn from the property for the year. Any excess deductions (“rental losses”) will be carried forward from year to year until they can be used. You can no longer use excess deductions from your residential property to off-set other income, such as salary and wages.
We’re introducing changes for the 2020 tax returns which will allow our system to calculate the amount of excess deductions to be carried forward for the year. This amount will be automatically included in the following year’s return in a new box called “excess residential rental deductions brought forward”.
If you file a paper return, you will need to manually calculate the amount of excess rental deductions to carry forward and show this on your return. When completing the following year’s return, you’ll need to refer to your accounts for this amount and show it as excess residential rental deductions brought forward.
Visit our website to find out more about residential property changes: ird.govt.nz/ring-fencing