The short version
- Year ended 31 March 2024: 50% of interest deductible
- Year ended 31 March 2025: 80%
- From 1 April 2025: 100%
- New builds (code compliance from 27 March 2020): fully deductible throughout
What changed
From October 2021, interest deductions on most residential rental property were phased out. The current government reversed the policy: you can claim 80% of your interest for the 2024–25 income year (1 April 2024 to 31 March 2025), and all of it from 1 April 2025.
Who it applies to
Residential rental property you own personally, jointly, in a trust or through a company. Commercial property was never affected, and new builds were exempt from the limits all along.
What hasn’t changed
- Losses are still ring-fenced. A residential rental loss can’t reduce tax on your salary or business income. It carries forward to future rental profits.
- The bright-line test is 2 years for sales from 1 July 2024. Sell within 2 years of buying and the gain is usually taxable, unless an exclusion such as the main home exclusion applies.
- Interest follows what the money was used for. If you borrowed against your home to buy a rental, the interest on that part of the loan can still be deductible.
What to do now
- Send your accountant full interest statements for every loan, for the whole year.
- Tell us about any refinancing or top-ups and what the money was used for.
- Keep repair invoices separate from improvements, which aren’t deductible.
- Check for rental losses carried forward from earlier years. They can now be used against your rental profits.
General information only. Talk to us about your own situation before acting on it.
