By Brad Golchin on February 15, 2019

Ring-fencing of rental property losses

Taxation (Annual Rates for 2019-20, GST Offshore Supplier Registration, and Remedial Matters) Bill.

You will probably be aware by now that the above Bill is before Parliament to introduce ‘ring-fencing’ of rental property losses for the 2019/2020 tax year. It is now approaching its secondreading and there seems to be nothing to stop its introduction in April of 2019.

In effect this will mean that any losses incurred on your rental property, will stay with the

company account and be offset against income/losses in future years, rather than the current practice of offsetting these losses against your income from salary, wages, or business income to reduce your tax liability.

The basis for the legislation is to reduce the unfairness between property investors and owner- occupiers, as perceived by the Government and it is expected by the Government that this ruling with improve housing affordability, particularly for first-home buyers. (Plus, of course, it will increase tax revenue).

As this will be starting from 1 April 2019, it would pay to consider some of your options. If you have recently purchased a rental property, and now decide it may not be the investment you were planning for, care needs to be taken in view of the Bright-Line Test. A discussion with your accountant maybe worthwhile at this stage. If your rental property needs any tax- deductible repairs and maintenance, consider bringing these into the 2018/2019 tax year to ensure you can obtain a tax deduction against other income before the new rules apply.



The bill is called:
Taxation (Annual Rates for 2019-20, GST Offshore Supplier Registration, and Remedial Matters) Bill.

  • First reading was in December and it is now at the Select Committee stage, submissions for which close on the 28 February.

  • the change proposed in the bill affects you as a residential property investor who has routinely offset rental losses against tax payable on other income (salary and wages).

  • Effectively these losses will now be ring-fenced and only used against any future residential rental income or taxable income on the sale of any residential land.

  • This means you can no longer expect a refund from losses on rental income.

  • We suggest you consider any tax-deductible repair and maintenance jobs on your rental property and bring that work into the financial year 1 April 2018 to 31 March 2019.


For your information The Bright Line Test was introduced earlier last year (March 2018) and

  • extended the period to 5 years for properties purchased on or after 29th March 2018.

  • this means that you pay tax on profits made on the sale of that property if sold within

    the five-year period.

  • The legislation is designed to make property speculation less attractive and level the

    playing field between property investors and home buyers.

  • The changes have no effect on your main house or a property rented out and used

    privately (e.g. a bach).

  • Also, if you are having to sell a rental property within the 5-year period or at any time

    you need to know what you can claim against any profit (or loss).

  • Claimable expenses include agent fees, marketing costs/home staging and capital

    improvements these have not been routinely claimed as expenses while renting your property out but add to the overall market value (e.g. a new roof or additions).

    Again, any losses under the Bright Line test are ring-fenced against any taxable gains from future sales.



We recommend you talk to us before you make any decision on buying/selling your investment properties – to make sure where you stand and to ensure you have claimed all your expenses for that transaction.

We would be pleased to discuss any aspect of your property investments with you at any time.

Feel free to Call us at 0800 30 40 40 Or email us at 


Published by Brad Golchin February 15, 2019