For your 2022, 2023 and 2024 tax returns, when you borrowed the funds determines if you can claim interest.
If an exclusion or exemption applies, the interest limitation rules do not affect you.
Funds borrowed before 27 March 2021
You can claim a percentage of the interest incurred for funds borrowed for properties acquired before 27 March 2021.
| Date interest incurred | Percentage of the interest that can be claimed |
|---|---|
| 1 April 2020 to 31 March 2021 | 100% |
| 1 April 2021 to 30 September 2021 | 100% |
| 1 October 2021 to 31 March 2022 | 75% |
| 1 April 2022 to 31 March 2023 | 75% |
| 1 April 2023 to 31 March 2024 | 50% |
Use this calculator for each loan to help you work out how much interest you can claim.
Property interest phasing calculator
Funds borrowed on or after 27 March 2021
If you borrowed funds on or after 27 March 2021 for your property, you cannot claim interest deductions between 1 October 2021 and 31 March 2024. However, you can claim a percentage of the interest if you used those funds to acquire a property in 1 of the following situations.
- Before 27 March 2021 (for example, you entered into an agreement, but settlement was in May 2021)
- Because of an offer you made on or before 23 March 2021 and that offer could not be withdrawn before 27 March 2021 (for example, as part of the contractual terms and conditions in a tender process).
For tax purposes, you acquire a property on the date you enter into a binding sale and purchase agreement (even if some conditions still need to be met).
Refinancing on or after 27 March 2021
Refinancing up to the level of the original loan does not affect the deductibility of your interest. If you can claim a percentage of the interest for the original loan, then that treatment remains the same.
Loans in a foreign currency
If you financed your property using a loan in a foreign currency, you cannot claim any interest you incurred between 1 October 2021 and 31 March 2024. However, if you refinanced the loan with a New Zealand dollar loan, you could claim a percentage of the interest from when you drew down the New Zealand dollar loan.
Variable balance loans - revolving credit or overdraft
If you have a variable balance loan for your property, you must trace each individual withdrawal and deposit to the loan account to work out how much interest you can claim. The 'high water mark' method makes it easier to work out how much interest you can claim between 1 October 2021 and 31 March 2025.
High water mark method
Under the high water mark method, if your loan is solely used to finance the property, you can claim any interest incurred using the relevant percentage if the balance remains at or below the balance as at 26 March 2021.
If the loan is used to finance both taxable and private activities, then you can calculate the amount of interest based on the lower of:
- the affected loan balance – this is the amount of the actual loan balance at any time that applies to the property (for example, exclude funds used to finance private expenditure)
- the initial loan balance – this is the loan balance on 26 March 2021.
If the affected loan balance is lower than the initial loan balance
You can claim all interest incurred (after you apply the relevant percentage for the year).
If the affected loan balance is higher than the initial loan balance
You can claim only the interest incurred up to the initial loan balance (after you apply the relevant percentage for the year). You cannot claim the interest incurred above the initial loan balance between 1 October 2021 and 31 March 2024.
You can claim 80% of the interest incurred between 1 April 2024 to 31 March 2025 even if the affected loan balance is higher than the initial loan balance.