Rental Income Guide β Tax on Residential Rental Properties in NZ
the taxation of the rental income from the residential properties in New Zealand. The guide covers the rental income reporting, the deductible expenses (the interest limitation, the repairs, the rates, the insurance), the negative gearing rules, and the ring-fencing of the rental losses.
Rental Income and Deductions
The rental income from the residential properties in New Zealand is taxed at the owner's marginal tax rate. The allowable deductions include: (a) the rates (the council rates), (b) the insurance (the building and the landlord insurance), (c) the property management fees (the agent fees), (d) the repairs and maintenance (the revenue expenses), (e) the interest on the borrowings (the phased reintroduction of the interest deductibility β 80% from 1 April 2025, 100% from 1 April 2026), (f) the depreciation (the building depreciation was reintroduced from the 2023-24 year at 2% per annum for the new builds and 1.5% for the existing buildings), and (g) the legal and accounting fees.
Loss Ring-Fencing
The rental losses are ring-fenced β the net rental losses cannot be offset against the other income (the salary, the business income) and must be carried forward to be offset against the future rental income or the gains from the property disposals. The ring-fencing applies to the residential rental properties only (not the commercial properties). The unused rental losses are carried forward indefinitely and can be used when the rental generates the net income or when the property is sold. See our Property Investment Guide → for the investment strategies.