The interest deductibility rules have been a hot button issue since they were introduced. They will start to be phased out from the 2024-25 tax year as residential property investors breathe a sigh of relief.
Phased rule changes from 1 April 2024
On 10 March, the coalition government confirmed the return of interest deductibility for property investors, with the phased-in changes taking effect from the start of the 2024-2025 financial year.
On 10 March, the coalition government confirmed the return of interest deductibility for property investors, with the phased-in changes taking effect from the start of the 2024-2025 financial year.
As a result, legislation has been passed allowing you to deduct 80% of your interest expenses on property investments in the year to 31 March 2025 (ie from 1 April 2024). Note that the previously proposed 60% allowance for the 2023-24 year has been removed. The existing 50% allowance will remain for the 2023-24 year.
Deductibility will return to 100% deductibility in the 2025-2026 financial year (that is, from 1 April 2025).
In summary
| Financial Year | % Interest Deduction |
| 2023-2024 | 50% |
| 2024-2025 | 80% |
| 2025-2026 | 100% |
Note: We are awaiting clarification to see if this applies to all investors or if there are any rules about when the property was purchased. Once we have this clarified we will send out an update via our ilumin LinkedIn and Facebook pages.
Questions?
Are you confused or just not sure what deductibility levels might apply for your circumstances? Have a chat with us to ensure you’ve accounted for (and budgeted for) the upcoming changes to interest deductibility on your property investments. For questions, clarification or assistance, just drop us a note or give us a call, we’re here to help.