Property Regulation Changes: A Simplified Guide

Here’s a straightforward breakdown of the key changes this year and what they may mean for you:

Interest Deductibility Reintroduced

In the past, property investors could deduct mortgage interest from their rental income when calculating taxes, which helped reduce their taxable income.

This year, interest deductibility has made a comeback. Investors can now claim 80% of the mortgage interest on residential properties. From April 1 2025, this benefit will increase to cover 100% of the interest paid. This change could mean substantial savings come tax time.

Brightline Test Reduced

The brightline test is a rule that determines how long you need to hold onto a property before selling it without facing additional taxes on any profit made.

Previously, the test period was 10 years for existing properties and five years for new ones. As of July, the brightline period has been cut to just two years for both new and existing residential properties. This change allows you to sell properties sooner without incurring extra taxes.

Relaxed Loan-to-Value Ratios (LVR)

The loan-to-value ratio (LVR) dictates how much of a property's value you can borrow from the lender.

Recently, the LVR limit has been relaxed from 65% to 70%. This means you may now need less of a deposit, to secure a mortgage for an investment property.

What’s Next?

These changes are designed to make property investment more accessible and potentially more profitable. However, the specifics can vary, and it’s essential to understand how these rules apply to your individual situation. Consulting with a mortgage adviser and property tax accountants can help you navigate these updates effectively.

If you’re considering how these changes might affect your property investment borrowing plans, reaching out to local experts can provide tailored advice and guidance.