Consultation on exemption of new builds from proposed tax rules


The Government has today confirmed new builds will be exempt from planned changes to the tax treatment of residential investment property. 

Public consultation is now open on details of the proposals, which stop interest deductions being claimed for residential investment properties other than new builds 

“The Government’s goal is to encourage more sustainable house prices, by dampening investor demand for existing housing stock to improve affordability for first-home buyers. The proposals we are releasing today will help to achieve that goal,” Finance Minister Grant Robertson said.  

“This is part of the Government’s move to cool the property market. A more sustainable housing market supports more first-home buyers to get into their own home but also protects our recovering economy. So we all benefit.” 

Revenue Minister David Parker said: “The proposal to exempt property development and new builds should help boost supply by channelling investment towards increasing housing stock and away from direct competition with first home buyers and owner-occupiers for existing housing stock.”

 “This consultation is focused on finalising the detailed design of the rules. The proposals will not affect the main home.”

 Generally, it is proposed that residential property would be considered a new build if it is a self-contained dwelling (with its own kitchen and bathroom, and that has received a code compliance certificate). The Government is also considering whether subsequent owners should also be exempt from the interest changes, and for how long any exemption might last.

Consultation closes on 12 July 2021. The measures will be introduced into Parliament later this year but will apply from 1 October 2021.

 The discussion document Design of the interest limitation rule and additional bright-line rules will be available at and accompanying summary sheets at   

Media contacts

Grant Robertson: Chris Bramwell 021 581 149

David Parker: Vernon Small 021 849 517

 Editor’s notes:

 The consultation document proposes:

  • Deductions for interest expenses on residential properties will be restricted from 1 October 2021.
  • Interest deductibility on a mortgage on a residential investment property acquired before 27 March 2021 will be gradually phased out between 1 October 2021 and 31 March 2025. Non-grandparented interest would immediately cease to be deductible from 1 October 2021.
  • Interest deductibility on a residential investment property acquired on or after 27 March would immediately cease to be deductible from 1 October 2021, unless an exemption applies.
  • Property development and new builds would be exempt from the interest limitation rules. In addition, new builds would be subject to a five year brightline test, rather than the ten year test.
  • Non-residential properties (for example commercial or industrial properties) would not be subject to the new rules. Also excluded would be employee accommodation, farmland, care facilities such as hospitals, convalescent homes, nursing homes, and hospices, commercial accommodation such as hotels, motels and boarding houses retirement villages and rest homes.
  • The main home would not be affected by the new rules. Interest related to any income-earning use of an owner-occupier’s main home such as a flatting situation would continue to be deductible.
  • Community housing providers will not be affected by the interest limitation rules if they are charities or otherwise tax exempt. The Government also proposes to exempt Kāinga Ora and its wholly owned subsidiaries from the interest limitation rules.